The 3 Year Relative Strength measures a stock's price change over the last 3 years relative to the price change of a market index. It shows the relative outperformance or underperformance of the stock in that timeframe.
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 that 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.
| Ticker | Name | Rel Strength | StockRank™ |
|---|---|---|---|
| LON:EEE | Empire Metals | 1,884% | 28 |
| LON:MTL | Metals Exploration | 1,331% | 90 |
| LON:FTC | Filtronic | 835% | 72 |
| LON:RR. | Rolls-Royce Holdings | 802% | 78 |
| LON:ZEG | Zegona Communications | 647% | 23 |