RRG – Relative Rotation Graph Explained

The Relative Rotation Graph (RRG) is a proprietary visualization technique designed to analyze the trend and relative performance of stocks or indices compared to a benchmark. The concept was introduced by Julius de Kempenaer (RRG Research) in 2004–2005. Since then, RRG has been integrated into popular platforms such as StockCharts, Bloomberg (since 2011), and Market Analyst 7.

The tool helps investors focus on strong sectors with positive momentum and is widely used for cycle analysis, sector rotation, and cross-country index comparison.

What is an RRG?

Unlike a traditional price-time chart, an RRG is a scatter plot with four distinct quadrants. Securities move from one quadrant to another in a clockwise rotation, capturing shifts in both relative strength and momentum over time.

This makes RRG especially useful for:

• Identifying strong and weak sectors
• Understanding momentum cycles
• Studying sector rotation in relation to a benchmark index

The Four Quadrants

Each quadrant on the RRG map represents a different combination of relative strength and momentum:

• Leading (Green): Strong relative strength and strong momentum
• Weakening (Yellow): Strong relative strength but momentum is fading
• Lagging (Red): Weak relative strength and weak momentum
• Improving (Blue): Weak relative strength but momentum is picking up

Securities typically move clockwise through these quadrants, reflecting the natural market rotation process.

Why It Matters

By tracking the position and movement of securities within the RRG:

Gain a clear, visual understanding of cyclical trends

Investors can spot emerging leaders before they peak

Avoid lagging sectors that underperform

Time sector rotation more effectively

I’ve also created a short video tutorial that explains how to interpret and use RRG in practice:

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