How do I Interpret Price Relative plotted on the "Price - Performance" Indicator?

Kevo

We are taught that the slope of the Price Relative line is important, not the end value. However, the Price Relative plotted on a "Price - Performance" indicator under the SharpCharts workbench shows end values like 1.1%. Does this now mean that Price Relative is outperforming by 1.1% ?

Julius_RRG

As this is a subject that 'interests me' I had a look at the Price-Performance chart indicator. It indeed does as you describe Kevo, it measures the performance of the stock in the chart in price terms. In its pure format it will just measure price performance in relative terms. When you make it a relative in the parameter box i.e. something like AAPL:$SPX then it will measure the relative performance of AAPL against the S&P 500 in percentage terms.

HOWEVER!! It does that using the starting point of the chart as the base, so when you alter the beginning of the chart your numbers will change... Also when you compare these numbers on charts that have different starting points you will be mixing apples and oranges.

As long as you are aware of these characteristics of this indicator it can perfectly be used to compare price and/or relative performances in percentage terms as markd also pointed out.

markd

I don't actually see documentation of Price-Performance, and a site search didn't bring up a blog entry either, although I'm pretty sure I remember reading out it there - probably one of Chip's blogs. But I think your guess is a good one. If I remember correctly, just as PPO is the "per cent" version of MACD, so is Price-Performance the "per cent" version of the Price indicator. The per cent scale allows meaningful comparison of charts - so for instance, you could determine whether stock A is outperforming the NASDAQ more or less than stock B is outperforming the SP500. With the Price scale, that can't be done.