What is ARIMAX Forecasting and How is it Used for Enterprise Analysis?

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TIME SERIES FORECASTING
AUTOREGRESSIVE INTEGRATED MOVING AVERAGE
WITH EXOGENOUS VARIABLES (ARIMAX)
A Simplistic Explainer ...

Introduction with
Example

Introduction
• An Autoregressive Integrated Moving Average with Explanatory Variable (ARIMAX) model
can be viewed as a mul...

Example
Let’s take an example of year wise
GDP values of India
As shown in figure below, the plot of
these data suggests t...

Standard tuning
parameters

Standard tuning parameters
Model
parameters :
In ARIMA, there are mainly three parameters
to be set to fit the model :
•p:...

Sample UI For
Input/Tuning
Parameters And Output

Sample UI For Selecting Inputs
And Applying Tuning Parameters
Select the variable you would like to Forecast
Year
GDP
Cons...

Sample UI For Output
MAPE should not exceed beyond 10 % as it
represents the margin of error in forecasting
Accuracy shows...

Limitations

Limitations
It is based on an assumption of linear relationship
between the predictors (Xi) and the target variable(Y) i.e...

Limitations
The Forecast error also known as
“Residuals” should show nearly
constant trend over time i.e. it
should be tim...

Business use case

Business use case
Business benefit:
•For various combination of
GDP/Consumer Inflation and Population
growth rates , compa...

Calculations

Calculations - Autoregression (AR)
• In an autoregressive model, which is one of the components in ARIMAX model, we
foreca...

Calculations - Integration (I) / Differencing (d)
• The second component of ARIMAX model i.e. I (for "integration") , is
u...

Calculations - Moving average (MA)
• A moving average model, the third component in ARIMAX uses past
forecast errors as a ...

Calculations - Exogenous variables (X)
• ARIMAX is the simply an ARIMA model with the inclusion of
exogenous variables (ad...

Identification of p,d,q values
• Values of p and q are determined based on the autocorrelation(ACF) and partial auto corre...

Identification of p,d,q values
 Thus, p, d and q parameters in ARIMAX(p , d , q) are substituted with integer values wher...

Other default parameters
• Below are the other default parameters while taking manual approach of
fitting the model :
• Ma...

Other Default Parameters
Include Intercept :
For instance , below are
the examples of forecasts
with and without
intercept...

Multicollinearity & Autocorrelation
• Multicollinearity means correlation between one or more predictors
• Variance Inflat...

Example
• The automatic approach will select ideal values of
Auto regression(p), differencing(d) and moving
average(q) par...

Model Accuracy
• Along with forecasted values, MAPE and prediction accuracy is displayed so user knows how much accurate t...

Want to Learn
More?
Get in touch with us @
support@Smarten.com
And Do Checkout the Learning section
on
Smarten.com
June 20...

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