Calculation and mechanics
The simplest form is the difference of the two returns in percentage points. If, for example, an ETF gains 12% and the benchmark 20%, the relative return is -8 percentage points.
The choice of benchmark determines the statement: SPY stands for large US stocks of the S&P 500, ACWI for a broad global stock market.
For charts of several instruments, indexing to 100 is common. Each price series is divided by its value on the common start date and multiplied by 100. All lines start at 100. Their distance shows how differently the prices have developed since the start.
relative return = return ETF - return benchmark
Distinction
The relative return compares the results of two investments over a period. The correlation, by contrast, describes how similar their daily moves were within that period.
Two ETFs can therefore be highly correlated and still achieve different total returns. For a country ETF, the relative return against a USD benchmark additionally contains the currency effect.
Related terms
- Country ETF (Single-country ETF)
- Correlation Matrix (30-day correlation)
- Treemap (Tiles View) (Heatmap tiles, area chart)
- EMA21 (Exponential moving average over 21 periods)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.