The power of Relative Change can be realized by its comparison to Classic Change.

Classic Change is calculated with the basic formulation shown below.



It can be rewritten as:



Relative Change is just a slight variation of Classic Change.

It alters the right side denominator from a to b; seen next.



Relative Change is a much more balanced measurement.

This becomes evident when we look at the two, in two different ways.

One is, you get back what was taken.

Two is, you put back what was given.

In all of these, if the amounts of give and take are the same, then it should be a wash; no gain or loss.

The table below shows the change for both Classic and Relative, in addition to their appropriated percentages, applied to some widget stocks.

Widget Stock X



Widget Stock Y



We see the sum of the changes is not a wash for the Classic Change, but it is for the Relative Change.

The Power of Relative Change will show its true power in another post.