US stocks are landing at Stockopedia Find out more

Relative Strength, 1 Month

What is the definition of RS 1m?

1 month relative Strength measures a stock's price change over the last month relative to the price change of a market index (in the case of UK stocks, this is the FTSE All-share). It shows the relative outperformance or underperformance of the stock in that timeframe.

This figure is sourced from Thomson Reuters. It is calculated dividing the price change of a stock by the price change of the index for the same time period. e.g. A stock falling by 20% versus an index rising 20% would lead to a Relative strength calculation of 100 * ( 80/120 - 1) = -33%


Stockopedia explains RS 1m...

Research indicates that relative strength is a negative signal in the near-term but generally a positive indicator in the medium (6-24 months).

A study by Hancock found a momentum-based strategy outperformed a broad universe of U.S. stocks by nearly 4% per year from 1927-2009. Research has shown that momentum is particularly beneficial when combined with a value style because the two are negatively correlated. Moskowitz and Grinblatt conclude that "A value-momentum combination mitigates the extreme negative return episodes a value investor will face (e.g., the tech boom of the late 1990s and early 2000 or a dismal year like 2008)"

However, momentum-based strategies have been shown to suffer badly during times of extreme market volatility such as the 2008/09 crisis.


Which Guru Screens is RS 1m used in?