The name refers to a methodology and firm specializing in relative strength analysis within the investment management industry. This approach focuses on identifying securities, sectors, or asset classes that are outperforming their peers. Instead of relying solely on fundamental or macroeconomic factors, it analyzes price momentum to determine investment allocations. A typical application involves ranking different stocks based on their price performance relative to a broad market index or sector benchmark.
This approach offers several potential advantages. It is a systematic, rules-based investment style that seeks to capitalize on trends. It helps investors avoid emotionally driven decisions by relying on objective, quantifiable data. The historical context reveals its origins in technical analysis, evolving into a distinct, sophisticated strategy for portfolio management. Its benefit lies in potentially identifying opportunities that may be overlooked by traditional fundamental analysis.
