Guide · Momentum
Does Levy Relative Strength work?
Across 375 stocks, Levy Relative Strength cut the worst fall on 89%, beat buying and holding on risk-adjusted return on 22% and on raw return on 18%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
One of the first academic momentum tests: own stocks trading well above their 27-week average, and stronger than the market on the same measure.
- In when the weekly close is above its 27-week average and that ratio beats SPY's.
- Out when either fails.
Momentum plays bet that what has risen most over the past months tends to keep outperforming for a while. The family guide
How to use it
- Expect to be wrong more often than right: only 28% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Real estate (37% beat holding on risk-adjusted return) and worst on Semiconductors (13%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Levy Relative Strength did best against holding in the 2008 crash (+29% median gap) and worst in the 2020–21 rally (−29%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Levy Relative Strength | +29% | −9% | +19% | −29% | +8% | −11% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Real estate | 37% | -0.08 |
| Industrials & rentals | 33% | -0.18 |
| Financials | 31% | -0.09 |
| Media & telecom | 30% | -0.11 |
| Indexes & ETFs | 29% | -0.06 |
| Software & devices | 24% | -0.18 |
| Metals & mining | 24% | -0.19 |
| Energy & power | 19% | -0.18 |
| Consumer & retail | 18% | -0.20 |
| Industrials & materials | 18% | -0.13 |
| Sectors | 17% | -0.23 |
| Big tech | 17% | -0.16 |
| Healthcare | 17% | -0.16 |
| Micro caps | 17% | -0.34 |
| Semiconductors | 13% | -0.14 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Levy Relative Strength holds 122 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.