Relative strength & beta
Separate the return that came from the market from the return that came from the stock — so you stop paying for beta and calling it skill.
Runs entirely in your browser — nothing you type is sent anywhere. Educational only, and not investment advice.
How to use this calculator
Each step names a control you will find on screen above.
- Beta — sensitivity to the index
How much the stock moves for a given index move. Beta 1.4 means a 10% index rise typically produces a 14% stock rise, and a 10% fall produces a 14% fall.
- Alpha — return above the index
What is left after beta has explained everything it can. This is the part attributable to the stock rather than the market.
- Run the downside
Set a negative index return. High beta is not a free upgrade — it delivers the same multiple on the way down.
- Read the relative strength line
The stock divided by the index. Rising means outperformance whatever the absolute direction, which is how sector rotation is spotted.
Worked example: An 18% year that was mostly the market
Your stock returned 18% over a year. The NIFTY returned 10%. The stock has a beta of 1.4.
What to enter
- Beta — sensitivity to the index
- 1.4
- Index return
- 10%
- Stock return
- 18%
What it shows you
- Expected from beta alone
- 14%
- Alpha
- +4%
- Share of return from the market
- ≈ 78%
- If the index had fallen 10%
- ≈ −10%
1.4 × 10%
−14% plus the 4% alpha
Where this is taught
A calculator gives you a number. These explain what the number means and when it misleads you.
- Technical Analysis11 minPairs trading and relative valueBetting that two related stocks converge rather than that either one rises — the logic, the maths and the way it fails.
- Technical Analysis11 minRelative strength and sector rotationA stock going up is not the same as a stock worth owning. Measuring performance against the index, and following where money is actually rotating.
- Technical Analysis11 minHow much of that move was just the indexYour stock rose 4%. If the index rose 3% and the stock has a beta of 1.3, it did nothing at all — and separating the two changes what you conclude.
- Technical Analysis12 minRanking instead of pickingRank the universe by strength, hold the top slice, replace it periodically. Mechanical, well documented, and psychologically very hard to follow.
- Technical Analysis12 minWhat bonds, the rupee and crude tell the equity chartEquities do not move in isolation. Rates, currency and commodities set the conditions, and reading them explains sector days that otherwise look random.