Comparative Relative Strength compares two securities to show how the securities are performing relative to each other. Be careful not to confuse Comparative Relative Strength with the Relative Strength Index.

Interpretation

Comparative Relative Strength compares a security's price change with that of a "base" security. When the Comparative Relative Strength indicator is moving up, it shows that the security is performing better than the base security. When the indicator is moving sideways, it shows that both securities are performing the same (i.e., rising and falling by the same percentages). When the indicator is moving down, it shows that the security is performing worse than the base security (i.e., not rising as fast or falling faster).

Comparative Relative Strength is often used to compare a security's performance with a market index. It is also useful in developing spreads (i.e., buy the best performer and short the weaker issue).