Quantitative • Momentum
Relative Strength & Sector Performance Ratio Analysis
Tracking sector leadership pairs (XLK/SPY, XLF/SPY, IWM/SPY) and identifying emerging market momentum trends.
Author: CMD Wire Institutional Research
Updated: August 2026 • 5 min read
1. The Mathematics of Relative Strength (RS)
In quantitative momentum strategies, Relative Strength Analysis compares the price performance of a specific sector ETF, industry, or individual stock against a broad benchmark index (typically SPY):
Relative Strength Ratio = Price of Asset (e.g. XLK) / Price of Benchmark (SPY)
2. Key Sector Pairs Monitored by Desk Strategists
- XLK / SPY (Technology / S&P 500): Measures risk-on growth appetite and leadership in digital transformation.
- XLF / SPY (Financials / S&P 500): Reflects banking health, credit expansion, and yield curve steepening sensitivity.
- XLU / SPY (Utilities / S&P 500): Rises during defensive flight-to-safety regimes and bond yield declines.
- IWM / SPY (Small Caps / Large Caps): Measures domestic economic confidence and broad market liquidity participation.