Relative Rotation Graphs - RRG
A Relative Rotation Graph® (RRG®), developed by Julius de Kempenaer after many years of research, is a complete top-down analysis technique. RRGs will help you look at the relative performance of a Security, Index or even an Asset Class and determine how it is performing relative to the benchmark.
Optuma also allows you to run RRGs on intraday time frames down to 1-minute intervals. This is a fantastic way to monitor the relative movements of the securities in your universe during the day and see them updating in real-time.
RRG charts in Optuma allow you to move back and forth through history, seeing not only where a security is today, but where it has come from and what it has done in the past.
The RRG chart plots a list of selected securities on a chart that is broken into four quadrants (Improving, Leading, Weakening, and Lagging).
The RRG® Lite module is available as an optional subscription addon. There is also a full module available which includes a number of additional advanced options such as the ability to create watchlists, scans and quantitative tests using the Optuma Scripting Language, display charts with RRG Quadrant bar colours, Forex RRGs, plus the ability to create intraday RRGs (requires realtime data provider).
For more information on creating RRG scans and quantitative tests using the Optuma Scripting Language please click here.
How to Use RRGs®
This video is a from a webinar held by Mathew Verdouw, CMT, CFTe, in which he goes over the theory and creation of the RRG before covering how we can monitor a portfolio using RRGs and how to perform RRG-based stock selection.
Optuma 101 Course
This video is from the Optuma 101 course that you can access here. This course takes you through the basics of Optuma and helps you get up and running and using Optuma to its full potential. In this video, learn how to open and use the RRG chart in Optuma.
Opening RRG® Charts
Relative Rotation Graphs can be opened via the New > Multi-code Chart menu and manually adding codes, or by right-clicking on a folder in the Security Selection window and selecting Open Folder As > Open RRG:
RRGs can also be opened from the Symbol List Manager.
Right-Click MenuWhen you right-click on a line on the RRG chart, there are a number of options available (where supported by the data source). The majority of the right-click options allow you to Drill Down or Drill Up a list based on GICS groupings, this is only available with a live data feed from Bloomberg.
For example, you could right-click on the S&P500 Financials Index, and select Display Index Members. The RRG chart will update to display all of the individual securities contained within the selected index. At the same time, the selected index (S&P Financials) is set as the RRG Chart's Benchmark code.
Chart PreviewYou can open a chart for any code displayed on the RRG chart by left-clicking the line. The selected line will display a chart preview window:
Clicking on the chart preview window will open a full-sized chart, with the RRG Lines tool applied automatically.
Tips WindowWhen you hover over a security on the RRG chart, you will see the tips window:
Date: Displays the date of the data point you are hovering over.
Ratio: Displays the Ratio value of the data point (X Axis).
Momentum: Displays the Momentum value of the data point (Y Axis).
Angle: Represents the current position of the security on the RRG chart
- 90-180 Degrees = Weakening Quadrant
- 180-270 Degrees = Lagging Quadrant
- 270-360 Degrees = Improving Quadrant
- 0-90 Degrees = Leading Quadrant
Distance: This number represents how far away the security is from the centre of the RRG chart. Securities with a larger Distance value will appear further from the centre of an RRG chart. One of the observations is that higher alpha comes from those that make bigger arcs, the distance measure allows us to quantify that.
Heading: This is the angle that the arrow is pointing to, 0 for up, 90 for right, 270 left and 180 down.
Velocity: This is the vector difference between the last two dots.
Quadrant: Represents which quadrant the security is currently in, 0 being leading, 1 weakening, 2 lagging and 3 improving.
Close: Displays the symbol and closing price of the security for the selected Date.
Index: Displays the symbol and closing price of the benchmark for the selected Date.
Actions & Properties
Clone Chart: When selected, an exact replica of the existing RRG chart will be created.
Print Chart: Opens the page in a PDF document, which can then be printed.
Reset Scales: When selected, the RRG chart will reset the zoom level and scaling to its default levels. Pressing Esc on your keyboard will have the same effect. To zoom in or out of the RRG chart, use the scroll wheel of your mouse. You can adjust the X- or Y-scale only by hovering the mouse over the scale and using the scroll wheel of your mouse.
Restore Default Settings: Click this action if you have adjusted the default settings of the RRG, and wish to return to the standard properties originally installed with Optuma.
Save Settings as Default: If you have adjusted any of the RRG properties, you can save the adjustments as your new default setting. Each time you open a new RRG it will display using the new settings.
Send To: This option allows the current chart to be saved as either an image file or saved to the clipboard. If you have Professional Services then the additional options of sending the chart via Chat Message, to Word and Outlook are also available.
Open List As: For all the securities that are included in the RRG, the following can be created: Charts, Scatter Plot Chart, Sector Map, Watchlist, Watch Tiles, Relative Comparison Chart and a Spread Chart.
Size Script: Expands to display the following opions:
- Clear Script - When selected, the Size script will be removed from the RRG.
- Script - From here you can select the script used to determine the relative size of each dot point displayed on the RRG lines, eg RSI value, or 1 month change. The larger the dot size or bubble, the greater the value of the script for that particular day. If the bubble is hollow then the value is positive, solid = negative value.
Comparison Style: By default, the benchmark is set to an index, but this can also be set to either: Annual rate of return, Price weighted average or Cap weighted average.
Comparison Index: To set or change the comparison index left click on the existing code and the security selection window will be displayed.
Grid View: Click this option to switch from a top-down chart view to a Watchlist style Grid view showing the RRG values (Ratio, Momentum, Distance, Heading, etc.).
Sensitivity: Adjusts the sensitivity of the RRG line calculation, similar to a moving average (lower values = faster reaction, higher values = slower reaction).
Plot Filter: By default, no filter is applied, this can be set to either Manual (you adjust the filter area by dragging the box) or Standard Deviation.
- Std Dev Multiplier: Only available when the Plot Filter is set to Standard Deviation. For example, when set to 2 the RRG will only show those symbols that are more than 2 Std Devs away from the centre.
Hidden Item Transparency: Allows you to adjust the transparency of the lines that are inside the Standard Deviation or Manual Plot filter.
Chart Size: Allows you to adjust how the chart scaling work. There are 3 options available:
Manual: Zoom level does not change as the history slider is moved backwards and forwards, allowing items to move in and out of view around the edges of the RRG window. This is the default option and works the same way as earlier versions of Optuma.
Auto All: As the history slider is moved backwards and forwards the scale of the RRG will adjust automatically to ensure all RRG lines remain in view, including any outliers on the extreme edge of the chart.
Auto Majority: As the history slider is moved backwards and forwards the scale of the RRG will adjust automatically to ensure most RRG lines remain in view. Any outliers on the extreme edge of the chart won't be used by the auto scale.
Hint Labels: Displays the list of Hint labels that can be selected. The hint labels are displayed as you roll your mouse over the different securities on the RRG chart.
Timeframe: Change the timeframe of the RRG being displayed, eg 1 Day, 1 Week, etc
Date Range: Sets the date range covered by the RRG.
Master Currency: If the chart contains multi-currency instruments this property gives you the ability to convert all to the same currency.
Tail Styles: This menu expands to display the properties for the RRG tails.
- Show Tails: When deselected, only a dot point will be displayed for the current value, omitting the tail view from the chart.
- Tail Length: Can increase or decrease the number of days in view on the RRG chart.
- Line Width: Adjusts the width of tail. Moving the slider bar to the right will increase the thickness.
- Smooth Tails: When selected, the tail image is smoothed removing any angles.
Display: This menu expands to provide the display options for the RRG. It controls the settings for the RRG grid, background colours, background transparency, scales and black and white printing.
Show Values: Displays a table to the right of the RRG Chart that will list each security with the current values.
Labels: Alters the labels that are displayed on the RRG chart. Can be set to: Code, Name, Name and Code, or no label at all.
Label Colour Style: The labels can be set to use either a single colour for all labels or to use the same colour as the tail.
Label Font Size: Adjusts the size of the label, moving the slider bar to the right will increase the font size.
Colour Style: Adjusts the colour style of the RRG lines. The following options are available:
- Random (Default)
- Fund Weight (requires fund weighting to be imported)
- By Sector (requires Bloomberg datafeed) - The colours used for each sector are:
- Energy - Yellow
- Materials - Orange
- Industrial - Dark Orange
- Consumer Discretionary - Red
- Consumer Staples - Blue
- Health Care - Purple
- Financials - Dark Blue
- Information Technology - Green
- Telecommunications Services - Dark Green
- Utilities - Teal
- RRG Trend Bars
Date Control Link: If a price chart for an RRG security is tiled alongside the RRG, selecting this option will display a vertical date line on the price chart. On the charts change the Grouping diamond to a colour and the Date Control Link will appear on chart. The date line can then be repositioned and the RRG will automatically correspond to the selected date position.
Show History Slider: Allows you to show or hide the History Slider that appears at the top of the window.
Linked to List: The RRG chart can be linked to either a scan, CSV list or fund via the Symbol List Manager.
Data AlertThe RRG chart includes a data alert, which will display if the comparison code, or the codes in the RRG chart are more than 5 days out of sync (which is an indication of a possible issue in the automatic data updates, or a loss of connection to a real-time provider, etc).
When the alert appears you can click the Fix button to try and resolve the issue. If you are using Optuma EOD data you may want to try running through Option 1 listed on the following article:
Fixing Data Gaps