The given Pine-Script, titled "Real Relative Strength (RSRW)," is designed to evaluate the relative strength of the selected security compared to a benchmark security, defaulting to "SPY". It utilizes TradingView’s programming language and is structured to run on its platform. Functionality:
Rolling Price Change Calculation: It calculates the rolling price change for both the selected security and the comparison security over a user-defined length of periods, defaulting to 12.
Rolling ATR Change Calculation: It computes the Average True Range (ATR) over the specified length for both securities, providing insights into market volatility.
Power Index Calculation: It computes the power index by dividing the rolling move of the comparison security by its rolling ATR, offering a measure of market strength or weakness relative to volatility.
Real Relative Strength (RRS) Calculation: It determines the Real Relative Strength of the selected security against the benchmark, adjusting the relative price move by the power index and dividing by the security's rolling ATR.
Correlation: The script also evaluates the correlation between the selected security and the compared security over the defined length, providing a correlation coefficient that is represented visually by different colors.
Visual Representation:
The Real Relative Strength is plotted with a blue line. A red line represents the baseline (0). Correlation is displayed with a color-coded line, ranging from green (high positive correlation) to red (high negative correlation).
Utility:
This script is valuable for traders and investors looking to assess the relative performance of securities against a benchmark, factoring in volatility and correlation, enabling more informed investment decisions based on market dynamics. License:
This script is subject to the terms of the Mozilla Public License 2.0.