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Momentum and rotation
Is relative-strength rotation the same thing as RSI?
Relative-strength rotation
What it bets
Inside a set of markets, the ones that were stronger recently will still be stronger until the next rebalance.
How the rule is written
Score the basket with one yardstick, for example the return over a past stretch, or where price sits relative to an average. Hold the few names with the highest scores. On a fixed rebalance day, sell what dropped off the list and buy what newly entered. It is usually long only. Relative strength here is not Wilder's RSI.
When it fails
Rebalance too often, and the cost of swapping holdings eats the rotation. If the names in the basket are highly correlated, rotation only changes the label on the same bet.
Do not confuse it with
Cross-sectional momentum often shorts the weakest group at the same time. Rotation only swaps the long holdings. RSI is an oscillator on one market. It does not assign size across a basket.