Relative Rotation Graph (RRG)

The Relative Rotation Graph is a relative strength strategy for portfolio management on weekly bars — the classic tool for sector rotation. It places an instrument on a two-dimensional map against a benchmark and holds it while it sits in the Leading quadrant (outperforming and still improving), exiting when it rotates into Lagging. It is the two-dimensional evolution of Relative Strength: where RS answers "is this outperforming?", RRG also answers "and is that outperformance getting better or worse?"

It is a hard, trending, weekly strategy for portfolio management.

How it trades

RRG measures two normalized coordinates, both centred on 100:

The sign of each axis gives four quadrants, which instruments rotate through clockwise:

Buy (rotate into leadership):

RRGLEADING()

Sell (relative strength exit — rotated into lagging):

RRGLAGGING()

The crucial property is that this is relative, not absolute. A sector can be rising in price the whole way and still be Lagging, because the benchmark is rising faster — capital is better deployed elsewhere. An absolute-return indicator would call that same sector strong.

When it works best

Excellent for sector rotation in a trending market with clear leadership dispersion, where capital genuinely rotates between sectors and leadership persists for months — precisely what the weekly timeframe and the two-axis view are built to capture. Its behavioural weakness is that in a market moving as one block (correlations near 1), every instrument hugs the 100/100 origin and small wobbles flip quadrants, producing whipsaw. Requiring a quadrant to persist for two consecutive bars, or gating entries on a minimum distance from the origin, are the natural hardenings.