Comparative Relative Strength is an indicator that allows a comparison of the price movement of a stock with another stock, sector, or index. The primary comparison being made is between similar stocks in the same industry or category. Comparisons can also be made between a stock and its competitors or a stock with the overall market index. Traders like to focus on trading in areas where the strongest up or down trends exist. It can be an individual stock or a specific group and sector.
One of the primary comparisons happens when you compare two securities to show how the securities are performing relative to each other. We start the comparison by looking at 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. When the indicator is moving
down, it shows that the security is performing worse than the base security.
Comparative Relative Strength is often used to compare a security's performance with a market index. It can be useful in developing spread trades where, for example, you buy the better performer and short the weaker issue.
In the following Apple chart, the Comparative Relative Strength indicator calculation of Apple (AAPL) with IBM (IBM) is displayed. The Comparative Relative Strength indicator shows that AAPL's price outperformed IBM's price during the last three months of 2007. IBM's price began to underperform Apple's price during the first month of 2008.
The Comparative Relative Strength indicator is normally calculated by dividing one price by a second price (the base price). The end result is a ratio, or relationship, between the two prices, be it a stock comparison or a stock verses an index comparison.
Menu Functions
The Default Symbol for comparison is the S&P 500 Index
($SPX). This symbol can be changed by clicking in the respective box and
changing the symbol. The Method of calculation can be selected from /
(Division) or -(Subtraction). The Reverse Calculation checkbox can also
be selected for the reverse calculation.
Line
The Color selector allows the user to change the color of the band, and the Thickness selector allows the user to change the thickness of the band displayed.
To save your modified settings to be applied to future charts, click Save As Default. Once this is clicked at all times in the future the settings you have set will be applied to future charts when this study is added.
To return to the Factory Settings, click Factory Settings and then click Save As Default. Once this done at all times in the future the Factory Settings will be applied to future charts when this study is added.
Click "Ok" to apply the Comparative Relative Strength (CRS) to the selected chart, or click "Cancel" or "Remove" to exit the study without applying it.
Click "Remove" to remove the study from the selected chart.