How to Calculate Relative Strength in Stock Analysis [with Python Code]
This video walks you through the definition of relative strength and how to calculate it. Relative strength is often used to rank stocks based on their underperformance or outperformance compared to a benchmark. The benchmark can be a stock, industry or market index.
If you prefer reading, here is a post on this topic: https://andriyblokhin.com/relative-st...
Relative strength is equal to a stock's price divided by the benchmark price. You can normalize even further the relative price series by dividing it by the first observation of the benchmark.
Relative strength analysis deals with a common problem when searching for an alpha. And that is a stock's correlation to the market or industry. Relative price series partially controls for this correlation in comparison to the absolute price series.
I also include Python code and show numerous case studies/examples of using relative strength or relative weakness to analyze stock performance. You can download and use the Python code in this tutorial at: https://drive.google.com/file/d/1jq34...
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