(Relative Rotation Graph)
Stocks move in and out of favor. Relative Rotation Graphs (RRG) tracks these changes and help investors be in the right place at the right time!
1. What is hot and what is not - TPA-RRG captures the inevitable movement of stocks into and out of favor.
2. Scores and ranking - Clients can quickly see which stocks are showing the best and worst relative strength characteristics. TPA found that using RRG’s was very beneficial, but we simplified the process by creating a score for each stock and sector to make it much easier to review the entire Russell 1000.
3. The best of both worlds. RRG & TPA - Now, clients can use TPA-RRG scores and rankings to identify stocks that are not only moving into favor, but are also technically positive.
4. TPA-RRG analyzes every stock in the Russell 1000 and 27 major sector & subsector ETFs
5. Finally, TPA offers 4 Relative Rotation Strategies to take advantage of TPA-RRG!
Click the image below for an example of sector ETFs rotating in and out of favor!
Important things to keep in mind:
1. The power of RRG is that it replicates the real-life movement of stocks in and out of favor. Stocks move from the Improving quadrant to the Leading quadrant, but inevitably start to underperform at some point. They then move into the Weakening quadrant and finally into the Lagging quadrant, before they repeat the cycle again.
2. TPA-RRG scores and ranking focuses on catching the moment when stocks are changing from Lagging to Improving to Leading and tries to avoid stocks that are moving from Leading to Weakening to Lagging
3. The tails for stocks in the RRG represent 10 weeks of movement.
4. The video shows the past 2 years of RRG for each stock.
What are RRGs?
Julius de Kempenaer developed Relative Rotational Graphs (RRG) in 2004 and thousands of investors use RRGs. RRGs, are a unique visualization tool for relative strength analysis. As a stock moves from left to right it is gaining relative strength (is outperforming the S&P500 in a given period. Alternatively, as a stock moves right to left it is losing relative strength. The genius of RRG’s is Relative Strength Momentum, which tells investors if relative strength is increasing or decreasing. This is what creates the clockwise motion of stocks and ETFs within an RRG and defines the four phases of a relative trend. True rotations can be seen as securities move from one quadrant to the other over time.