The relative-strength graph measures the price return of a stock versus the price return of the S&P 500 index. It is calculated by taking the month-end price of the stock and dividing by the index price for the same period.
Benefit
Some technical investors take a stock’s price performance relative to that of the market to be indicative of future performance.
Origin
Morningstar calculates this data in-house.
For the Pros
Relative strength is calculated assuming that an investor buys an equal dollar amount of both the stock and the index at the beginning of the period. .