Relative Strength Ratio and Stock Performance | CFA Level 1 Exam Prep

Increasing Relative Strength Ratio Indicates Positive Stock Performance

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Question

When the relative strength ratio, the stock's price divided by the index's prices, is increasing this means the stock is:

Answers

Explanations

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A. B. C. D.

C

When the relative strength ratio, which is calculated by dividing the stock's price by the index's prices, is increasing, it indicates that the stock is performing better than the index.

The relative strength ratio is a technical indicator used by investors and analysts to compare the performance of a stock against a broader market index. It measures the price performance of the stock relative to the index over a specific period.

If the relative strength ratio is increasing, it means that the stock's price is rising at a faster rate than the index's prices. This suggests that the stock is outperforming the broader market represented by the index.

In other words, when the relative strength ratio is increasing, the stock is doing better than the index. Therefore, the correct answer to the question is C. doing better than the index.