From the course: Business Analytics: Forecasting with Exponential Smoothing
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Identify the appropriate baseline
From the course: Business Analytics: Forecasting with Exponential Smoothing
Identify the appropriate baseline
- [Instructor] When you're preparing to forecast from a baseline, it's important to understand how earlier observations in the baseline are related to later observations in the same baseline. One widely accepted way to evaluate a baseline is by a way of what are called correlograms. The correlogram is a column chart that shows the strength of the correlation between two sets of values in a baseline. Here's an example. The values in columns A through E form the basis for a lag one correlogram. The values in column E labeled lag one and highlighted in yellow, are the same values as you see in column B, also highlighted in yellow. But in column E, those values have been shifted up by one row. So for example, the 82 in cell E4 is the same as the 82 in cell B5. The 165 in cell E5 is the same as the 165 in cell B6. The values in the columns B and E, that are surrounded by a heavy black border, are the sets of values that the tool will correlate. In this case, with the values in columns B…
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