11
$\begingroup$

Anyone have a clue how to calculate the JdK RS-Ratio?

Let's say I want to compare the Relative strength for these:

  • EWA iShares MSCI Australia Index Fund

  • EWC iShares MSCI Canada Index Fund

  • EWD iShares MSCI Sweden Index Fund

  • EWG iShares MSCI Germany Index Fund

  • EWH iShares MSCI Hong Kong Index Fund

  • EWI iShares MSCI Italy Index Fund

  • EWJ iShares MSCI Japan Index Fund

  • EWK iShares MSCI Belgium Index Fund

  • EWL iShares MSCI Switzerland Index Fund

  • EWM iShares MSCI Malaysia Index Fund

  • EWN iShares MSCI Netherlands Index Fund

  • EWO iShares MSCI Austria Index Fund

  • EWP iShares MSCI Spain Index Fund

  • EWQ iShares MSCI France Index Fund

  • EWS iShares MSCI Singapore Index Fund

  • EWU iShares MSCI United Kingdom Index Fund

  • EWW iShares MSCI Mexico Index Fund

  • EWT iShares MSCI Taiwan Index Fund

  • EWY iShares MSCI South Korea Index Fund

  • EWZ iShares MSCI Brazil Index Fund

  • EZA iShares MSCI South Africa Index Fund

Each of them should be compared to the SP500 (SPY index). Calculate the relative strength of each of them to SPY and have it normalized (I think it is the only solution)

More info on the concept. http://www.mta.org/eweb/docs/pdfs/11symp-dekempanaer.pdf

enter image description here

enter image description here

$\endgroup$
5
  • $\begingroup$ Anyone have an idea how the formula could look like? $\endgroup$ Jun 4, 2015 at 1:34
  • $\begingroup$ I know the formula exactly. I can give you a preview if you interested. $\endgroup$ Jan 5, 2017 at 8:37
  • 2
    $\begingroup$ This is not a good answer. The OP is obviously interested in how the formula looks like. Otherwise he/she wouldn't have asked. Telling him/her that you know it without actually giving any explanations doesn't help. $\endgroup$ Jan 5, 2017 at 9:02
  • $\begingroup$ Can you explain a little bit more, for the details ? $\endgroup$
    – EES88899
    Nov 18, 2019 at 17:53
  • $\begingroup$ I am looking for the same, above 11symp-dekempanaer.pdf link is dead. Does anyone know working one ? $\endgroup$ Jul 21, 2021 at 4:22

3 Answers 3

6
$\begingroup$

Reading what I have, I can only offer a guess.

1: Let's say you're looking at 9 sectors compared to \$SPX on a daily chart. Foreach sector, compute relative closing price: 100 * Sector/\$SPX

2: It looks like the RS-Ratio is averaged over 14 periods. I say 14 because stockcharts.com shows RS-Ratio peaking after a lag (2-3wks), despite price peaking 2-3 weeks earlier. I use 14 because that's a common number in TA.

3: RS-Momentum looks like it's simply the rate-of-change of the calculation in #1. Indeed, stockcharts.com says exactly this: "RS-Momentum is an indicator that measures the momentum (rate-of-change) of RS-Ratio."

4: When they talk about normalizing, compute the mean & stddev of the 9 calculations in #1, then normalize as ... 100 * ((value-mean)/stddev + 1). I would guess that these values are "normalized" per day. I would guess that a separate normalization would be required for the values from #3 as well.

That's how I would approach the problem.

I consulted: http://stockcharts.com/school/doku.php?st=rrg&id=chart_school:technical_indicators:rrg_relative_strength in formulating my response, and I've had a few months to sleep on it.

$\endgroup$
1
  • $\begingroup$ This answer, and all of the other answers in this question are wrong. I implemented what described here and compared against stockcharts.com In step 4, you describe normalizing to a z-score. What I see on stockcharts.com are values ranging all of the way down to 94. This is nowhere close to what you would see with z-score normalization; you're never hitting 3+ sigma. You will almost always see values ranging from 99 - 101. Much different than on stockcharts.com $\endgroup$
    – Simian
    Sep 14, 2021 at 0:26
5
$\begingroup$

I think the normalisation step is incorrect. Since we would like have 100 as our baseline, it should be 100 + ((value-mean)/stddev + 1). Then we get fairly realistic results. See the following Python function (code review welcome):

def rs_ratio(prices_df, benchmark, window=10):
    from numpy import mean, std
    for series in prices_df:
        rs = (prices_df[series].divide(benchmark)) * 100
        rs_ratio = rs.rolling(window).mean()
        rel_ratio = 100 + ((rs_ratio - rs_ratio.mean()) / rs_ratio.std() + 1)
       prices_df[series] = rel_ratio
    prices_df.dropna(axis=0, how='all', inplace=True)
    return prices_df
$\endgroup$
1
  • $\begingroup$ Biasing the rel_ratio by adding 1 makes no sense. So if you are 1 standard deviation below the mean, you end up with a score of 100. Complete bollocks, along with the other answers here. $\endgroup$
    – Simian
    Sep 14, 2021 at 1:48
1
$\begingroup$

It looks just like a 10 period and 30 period simple moving average crossover (ie PPO using simple moving averages)

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.