RRG Graphs

geraldtown

I just started looking at RRG on stockcharts.

I am confused about what time period is being used to generate the plotting of the RS-Ratio and the RS-Momentum on the graph. Apparently, it has nothing to do with the 1, 3, 5, or 10 year time frame that you can select, because that only seems to impact the information on the S&P index (for illustration purposes only). So, what is the time period that is being used?

Whatever the time period is, it does not appear to be something that I can adjust - is that correct?

I also don't quite follow how the choice of daily or weekly is impacting the graph. I understand that daily or weekly just refers to the source of the data (daily or weekly) that is being used to generate the calculations and is not the actual time period over which you are doing the measurement - correct?

If that is the case, then I'm somewhat surprised by the degree of difference when I change from weekly to daily. Assuming that you are doing the calculation of RS-Ratio and RS-Momentum over the same time period (whatever it is), I did not expect to see the choice of daily or weekly data impacting the graph so much. Also, since you are ending up at the same end point and covering the same measurement period (I assume), but just using different inputs (daily or weekly), shouldn't the end location of a particular stock on the graph be essentially the same, regardless of the choice of daily or weekly?

gord

I'm sure Julius will see this and provide some further information, but in the mean time I can direct you to some detailed tutorials on RRG charts. In particular the last link is an article from Julius's RRG blog which addresses the issue of Weekly and Daily RRG charts in detail, with examples.

http://stockcharts.com/docs/doku.php?id=other-tools:rrg-charts

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:rrg_charts

http://stockcharts.com/articles/rrg/2014/08/daily-data-now-available-for-rrg-charts.html

Note; there are also many other articles on RRG graphs in Julius's RRG blog, I would suggest reading all of them. Just look under the Blog section and select RRG charts.

Kevo

I would recommend having a good understanding of RRGs before using them as suggested by gord and the links he provided above.

Below is an illustration that should help, which maps the equivalent to the SharpCharts workbench.

The 1,3,5, and 10 years is the time horizon or range of the data. The source of the data is the open/high/low/close/volume of the daily/weekly bars from the ticker symbols you input into the RRG Chart. The period or scale of the RRG chart is the Daily/Weekly setting.



Hope this helps.

geraldtown

Gord and Kevo,

Thanks for your replies and input. When you look at a Sharpchart, it graphs about 6 months of price action and may have a 20, 50 or 200 day moving average line also.

When I look at the RRG graph and see where a particular stock is located in the quadrant (based on the RS-Ratio and RS-Momentum, I don't see any reference to the time period over which these RS ratios are calculated. This is not the same thing as the daily vs. weekly data points - I understand that difference - but to me, it is like looking at a moving average line, but no one tells you if you are seeing a 20, 50 or 200 day moving average.

Changing the time period in the RRG settings from 1 year to 3, 5 or 10 years makes no difference on the RRG quadrant graph, whereas changing your time period on a stockcharts graph does affect the graph. So, if the time period option at the top of the RRG settings is irrelevant (except as a reference for whatever index you are using), then it appears to me that the user cannot alter the time period used in the RRG calculation - but on top of that, there doesn't seem to be any reference in any of the materials to the time period over which the calculation take place.

In other words, is the RS-Ratio measuring a 3 month period, 6 months, 18 months, or what?

Kevo

After reviewing my illustration above, it looks like I need to make a correction. It looks like the Tail Length option of RRG Charts more closely corresponds to the Range option of SharpCharts.

All I am doing is taking the major RRG Chart options and showing the equivalent options in SharpCharts to help get terminology straight. I am not suggesting that RRG Charts are similar to SharpCharts. They are two different types of charts.




P.S. This is a good exercise to go through. I am not an expert. Please correct me if I am wrong.

Kevo

Regarding your original question from the first post: "So, what is the time period that is being used?". If you mean range or time horizon, or the amount of historical data on the chart, then the answer to your question is the Tail Length option.

Daily or Weekly is the period or scale used in RRG Charts.

From your first post, your original question: "shouldn't the end location of a particular stock on the graph be essentially the same, regardless of the choice of daily or weekly?"
The answer is no because you are looking at two different scales.

Your question from your second post: "I don't see any reference to the time period over which these RS ratios are calculated. " The reason for this is that RRG Charts is a different type of chart than a SharpChart. SharpCharts shows range or the historical time horizon linearly, which is why you see a DateTime axis on SharpCharts. RRG Charts do not show range or historical time horizon linearly. There is no DateTime axis on RRG Charts.

Your question from your second post: "In other words, is the RS-Ratio measuring a 3 month period, 6 months, 18 months, or what?" is the same question from your original post. The answer is the Tail Length option.

Julius_RRG

I am late to the game here .... but I see correct answers have already been given. Geralds question also came to me via SCC support. Just to add my two cents here, this was my answer:

Hi Gerald,

The 1, 3, 5, and 10 year time frames that can be selected on SCC are indeed referring to the benchmark chart on the right (default is the S&P 500 but it can be any other ticker symbol if you wish) but it also controls the length of the animation!

There is indeed no "Time Period" as such that you can adjust in the RRG-Lines (the JdK RS-Ratio and JdK RS-Momentum). There are multiple periodical values embedded in the algorithms that make the RRG-Lines but they are not variables and cannot be changed.

The Daily / Weekly parameter defines which data-set is used to calculate the observations on the trails. There is a section in the RRG Chart-School article which deals with the difference between Daily and Weekly RRGs. You can find it here.

I hope this will also clarify your confusion with regard to the "end-point" of the trails on different time-frames. And just to be clear the end-point of a trail will very likely NOT be the same on a daily or a weekly RRG. As a matter of fact, if that were to happen it would be a co-incidence as it involves two completely different trends in relative strength.

JeffB

From my observations, it appears that RS-Ratio is generated roughly from a 6 month look-back period. It would be nice to be able to optimize this look-back period. In other studies that I have looked at, a 3 month look-back in a monthly rebalancing scheme produces far better results than a 6 month look-back.