Relative strength ETFs are exchange-traded funds that rank holdings by how strongly they are outperforming their peers or a benchmark, and hold the leaders. They package relative strength analysis into a fund so you do not have to run the ranking yourself.
What is relative strength?
Relative strength measures how one asset is performing compared with something else, usually over 3 to 12 months. If an ETF is up 4% while the broader market is up 2%, it has positive relative strength. The key point is that it is a comparison, not an absolute number: an ETF can fall and still have strong relative strength if everything else fell more.
In practice, analysts rank a universe of ETFs or stocks by their relative strength and buy the strongest, on the theory that leadership persists for a while before it reverses.
What relative strength is not
- Not absolute momentum. Momentum is often just an asset’s own return. Relative strength is that return measured against a benchmark or peers.
- Not fundamental strength. A company can have strong earnings and weak relative strength, or vice versa. Relative strength is purely price-based.
How relative strength ETFs work
Most relative strength ETFs use a ranking model built by Dorsey Wright, a Nasdaq company that has specialized in relative strength since the 1980s. The model scores each eligible stock on its relative strength, and the fund holds the top slice. Holdings are rebalanced periodically (PDP rebalances quarterly) so the portfolio keeps rotating into new leaders as old ones fade.
The main relative strength ETFs
| Fund | Ticker | Expense ratio | Approach |
|---|---|---|---|
| Relative Strength Managed Volatility Strategy | RSMV | 0.95% | Relative strength plus a volatility overlay |
| Invesco Dorsey Wright Momentum | PDP | 0.62% | Ranks roughly 100 US stocks by relative strength |
Expense ratios as of August 2026. Verify current fees before investing. Dorsey Wright also runs DWAS (small cap) and QQQA (Nasdaq-100) on the same relative strength approach.
Relative strength versus momentum
The line is blurry, and many funds mix the two. A momentum ETF typically buys assets that have risen the most. A relative strength ETF buys assets that are beating their benchmark. In a rising market the two produce similar lists; in a falling market relative strength can point to assets that are merely falling less. For the step-by-step process of applying either, see our ETF momentum strategy guide.
Risks to relative strength
- Reversals. Leadership can turn over suddenly, and a relative strength fund will be caught holding yesterday’s leaders.
- Concentration. Ranking models tilt toward a few hot sectors, so the fund can be far less diversified than the index.
- Turnover and cost. Quarterly rebalancing trades more than an index fund, adding costs and tax drag on top of the expense ratio.
- Chopping. In trendless, range-bound markets the strategy whipsaws and can lag a simple index fund.
Rank your own watchlist in five minutes
You do not need a fund to see relative strength in action. Take the ETFs on your watchlist and write down each one’s return over the last 6 and 12 months, then the same for the S&P 500. Rank them by how far above or below the index they sit. The ones above the index have positive relative strength; the ones below have negative. Watch how that ranking shifts month to month. That is the entire concept, and it is why the funds are mechanical rather than clever.
To test whether a trend or momentum rule actually helped historically, run the numbers through our free backtest calculator.
FAQ
What is relative strength?
Relative strength measures how an asset is performing compared with a benchmark or its peers, usually over 3 to 12 months. A high relative strength reading means the asset is outperforming, not that it has risen in absolute terms.
What is a relative strength ETF?
A relative strength ETF is a fund that ranks holdings by relative strength and holds the leaders, rebalancing on a schedule. RSMV and the Dorsey Wright funds (PDP, DWAS, QQQA) are examples.
Is relative strength the same as momentum?
They overlap but are not the same. Momentum usually means an asset’s own recent return. Relative strength compares that return against a benchmark or peers, so an asset can have positive momentum but weak relative strength if its peers rose more.
What is the best relative strength ETF?
There is no single best. RSMV combines relative strength with a volatility overlay, while PDP ranks roughly 100 US stocks by relative strength. The right choice depends on whether you want the volatility management or a pure ranking.
Disclaimer: Educational content only, not financial advice. Fund fees and details change; verify them on the issuer’s site before investing. Full disclaimer and affiliate disclosure.
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