TIME SERIES ANALYSIS

data("AirPassengers")

mydata<-AirPassengers

str(AirPassengers)

head(AirPassengers)

datasets::AirPassengers
1. Using function Time Series (TS) (How to covert data into Time series)

ts(mydata, frequency = 12, start=c(1949,1)) # use 12 because it is monthly data and 12 months are
there, and start with 1949 with first month- it is used to check whether suitable for time series

attributes(mydata) # to examine the class of data- it shows its time series data

or class (mydata)

2. plot(mydata) # trends in the data

increasing trends but its seasonal also- it means in one year it increases and also decreases, hence it is
non-stationary in nature- hence we need to make log transformation. The span is smaller in initial
years and later on increases

3. Log Transformation

mydata<-log(mydata)

now the Span is almost similar

4. Decomposition of Additive Time Series

decomp<-decompose(mydata)

decomp$figure

plot(decomp$figure, type="b", xlab="month",ylab="seasonality index",col="red",las=2)# trends

become more apparent and June, July, Aug and Sep highest Passengers. July and Aug are having
20% traffic (0.2 Seasonality Index).

5. plot(decomp)# Used to identify the various prominent characteristics of Time series.

It can be seen following features-

- Seasonality
- Increasing trends
- Random with in the season
TIME SERIES FOR FORECASTING WITH ARIMA (AUTOREGRESSIVE INTEGRATED MOVING AVERAGES)

Install package (forecast)

library(forecast)

model1<-auto.arima(mydata)

run model1

ARIMA(0,1,1)(0,1,1)[12]

In this

0 means P- AR Order
1 means D- Degree of differencing
1 means Q- MA Order (moving averages)

AIC=-483.4 AICc=-483.21 BIC=-474.77 (help in

chossing best TS model)
AIC- Akaike information criterion
AICc- AIC with correction
BIC- Bayesian information criterion

attributes(model1)

model1$coef
ACF and PACF Plots

acf(model1$residual, main="Correlogram")# The autocorrelation in data is in the limit of dotted lines

pacf(model1$residuals, main"Partial Correlogram")# One line touches the lower boundary. To verify
the same use LjungBox Test

Box.test(model1$residual,lag=20,type="Ljung-Box")

data: model1$residual
X-squared = 17.688, df = 20, p-value = 0.6079
As the P-values is more than 0.05, hence little evidence is there for having non zero autocorrelation in
data.

Residual Plots

hist(model1$residuals, col="pink",xlab="error", main="histpgram of residuals", freq=FALSE)

lines(density(model1$residuals)) # seems normal distribution curve

forecast1<-forecast(model1,48) # forecast for 48 months

library(ggplot2)

autoplot(forecast1)# forecast for next 48 months as highlighted

Accuracy for this Model1

accuracy(model1)

ME RMSE MAE
MPE MAPE
Training set 0.0005730622 0.03504883 0.02626034
0.01098898 0.4752815
MASE ACF1
Training set 0.2169522 0.01443892