understanding the engine of rrg a complete breakdown of rs ratio and rs momentum
Relative Rotation Graphs (RRG) are designed to solve one of the most persistent challenges in market analysis: comparing the relative performance of multiple assets against a single benchmark in a clean, intuitive way.
For analysts, portfolio managers, and serious investors, analysing dozens of relative strength charts individually is inefficient and often counterproductive. Insights get buried in noise.
This is exactly the problem that Relative Rotation Graphs were built to solve.
At the heart of every RRG lies a powerful analytical engine. Just as an engine relies on key mechanical components to generate motion, an RRG is powered by two specialised indicators:
Together, these indicators form the drivetrain of the RRG, transforming complex relative performance data into a single, visual framework that tracks trend strength and trend momentum simultaneously.
Understanding how RS-Ratio and RS-Momentum work is the first and most important step to mastering Relative Rotation Graph analysis.
The JDK RS-Ratio is a proprietary indicator designed to measure the trend strength of a security’s relative performance compared to a benchmark.
While it is derived from ratio analysis (similar to a traditional price relative line), it is not the same as a raw relative strength chart.
In simple terms:
RS-Ratio tells you whether an asset is in a relative uptrend or downtrend—and how strong that trend is.
The 100 level is the critical reference point for RS-Ratio interpretation.
The distance from 100 matters:
Because RS-Ratio is intentionally lagging, it filters out short-term noise and focuses only on sustained, meaningful relative trends, a key reason why RRGs are widely used in professional portfolio analysis.
While RS-Ratio measures trend strength, it does not explain whether that trend is improving or deteriorating.
This is where JDK RS-Momentum comes in.
RS-Momentum measures the rate of change of the RS-Ratio itself. In other words, it is an indicator of an indicator.
Consider this scenario:
The answer depends on direction:
RS-Momentum was created to provide this missing context.
Unlike the RS-Ratio, the RS-Momentum is a leading indicator. Because it tracks acceleration and deceleration, it often signals changes before they appear in RS-Ratio.
The most important reference level is, again, 100.
Because RS-Momentum is more sensitive by design, it fluctuates more frequently around the 100 level than RS-Ratio.
The real power of Relative Rotation Graphs emerges when RS-Ratio and RS-Momentum are combined.
On an RRG chart:
The interaction between RS-Ratio and RS-Momentum determines an asset’s position in the four RRG quadrants:
For example, an asset in the Leading quadrant is:
This combined view allows investors to track relative leadership, deterioration, and rotation with far greater clarity than traditional charts.
Understanding Relative Rotation Graphs begins with mastering their core components.
Together, they map the rotational journey of assets across RRG quadrants, offering a powerful framework for sector rotation, relative strength analysis, and portfolio positioning.
With a clear understanding of RS-Ratio and RS-Momentum, you now have the essential foundation needed to confidently interpret RRG charts and apply them effectively in real-world market analysis.
Explore the RRG chart on sharpely.
RS-Ratio measures the strength of an asset’s relative trend compared to a benchmark. Values above 100 indicate a relative uptrend, while values below 100 indicate a relative downtrend.
Yes. RS-Momentum is a leading indicator because it measures the rate of change of the RS-Ratio and often signals potential trend reversals before they appear in the RS-Ratio.
The 100 level represents benchmark-neutral performance. Values above or below this level determine whether an asset is outperforming or underperforming the benchmark.
RS-Ratio defines trend strength, while RS-Momentum defines trend direction and acceleration. Together, they determine an asset’s position and movement within RRG quadrants.