1. Explain the 4 components of time series?

Time series refers to a chain of data points observed and recorded in a time order over a
specific period. It represents the output obtained from monitoring and tracking specific
events or processes.
Its analysis derives meaningful statistics, interprets trends, identifies patterns, and
contributes to decision making. Examples of its application include budgetary analysis and
stock market analysis.

 Secular Trend
It indicates the long-running pattern identified from the chain of data recorded. It can be
increasing or decreasing, indicating the future direction. Although it is commonly known as
an average tendency of any aspect, the trend may vary in specific parts oscillating between
upward and downward. Still, the overall trend will depict a single movement only, either
upward or downward. For example, in summer, the temperature may rise or decline in a
day, but the overall trend during the first two months will show how the heat has been
rising from the beginning.

 Seasonal Trend
Seasonal variations represent the presence of rhythmic patterns. Certain pattern repeatedly
occurs at the same period or point every year. For example, the sale of umbrellas increases
during the rainy season, and air conditioners increase during summer. Apart from natural
occurrences, man-made conventions like fashion, marriage season, festivals, etc., play a key
role in contributing to seasonal trends.

 Cyclical Variations
It represents a cyclical pattern composed of up and down movement. It may span more than
one year and go from phase to phase to complete a cycle. A business cycle is a significant
example of a cyclic variation, denoted that a business goes through four stages in its life.
Starting from the introduction, expansion, prosperity, and decline. How well the company
can perform and stretch its phases depends on its performance.

 Irregular Variations
 It refers to variations that are uncontrollable and inevitable. It occurs randomly, opposite to
regular changes or occurrences, and does not associate with a pattern. These fluctuations
are unpredictable and unexplainable. Forces like natural and man-made disasters can trigger
irregular variations

2. WHAT IS DESCRIPTIVE ANALYTICS?

Descriptive analytics is the process of using current and historical data to identify trends and
relationships. It’s sometimes called the simplest form of data analysis because it describes
trends and relationships but doesn’t dig deeper. Descriptive analytics is especially
useful for communicating change over time and uses trends as a springboard
for further analysis to drive decision-making.

 Business metrics are decided. First, metrics are created that will effectively
evaluate performance against business goals, such as improving operational
efficiency or increasing revenue. Vesset says the success of descriptive analytics
heavily relies on KPI (key performance indicator) governance. ‘Without governance,’
he writes, ‘there may not be consensus regarding what the data means, thus
guaranteeing analytics a marginal role in decision making.’
 The data required is identified. Data is sourced from repositories such as reports
and databases. ‘To measure accurately against KPIs,’ Vesset says, ‘companies
must catalogue and prepare the correct data sources to extract the needed data and
calculate metrics based on the current state of the business.
 The data is collected and prepared. Data preparation – depublication,
transformation and cleansing, for example – takes place before the analysis stage
and is a critical step to ensure accuracy; it is also one of the most time-consuming
steps for the analyst. 
 The data is analysed. Summary statistics, clustering, pattern tracking and
regression analysis are used to find patterns in the data and measure performance. 
 The data is presented. Finally, charts and graphs are used to present findings in a
way that non-analytics experts can understand.

Example-

 Financial statements are periodic reports that detail financial information about a

business and, together, give a holistic view of a company’s financial health.
 There are several types of financial statements, including the balance sheet, income
statement, cash flow statement, and statement of shareholders’ equity
 Vertical analysis involves reading a statement from top to bottom and comparing
each item to those above and below it. This helps determine relationships between
variables.
  Horizontal analysis involves reading a statement from left to right and comparing
each item to itself from a previous period. This type of analysis determines change
over time
 ratio analysis involves comparing one section of a report to another based on their
relationships to the whole.

3. What is predictive analytics?

While descriptive analytics focuses on historical data, predictive analytics, as its name
implies, is focused on predicting and understanding what could happen in the future.
Analysing past data patterns and trends by looking at historical data and customer insights
can predict what might happen going forward and, in doing so, inform many aspects of a
business, including setting realistic goals, effective planning, managing performance
expectations and avoiding risks.
What can predictive analytics tell us?

Since predictive analytics can tell a business what could happen in the future, this
methodology empowers executives and managers to take a more proactive, data-driven
approach to business strategy and decision making. Businesses can use predictive analytics
for anything from forecasting customer behaviour and purchasing patterns to identifying
sales trends.

Example—

The healthcare industry, as an example, is a key beneficiary of predictive analytics.

In 2019, RMIT University partnered with Digital Health Cooperative Research Centre
to develop clinical decision support software for aged care that will reduce
emergency hospitalisations and predict patient deterioration by interpreting historical
data and developing new predictive analytics techniques. The goal is that predictive
analytics will allow aged-care providers, residents and their families to better plan for
the end of life.

4. What is prescriptive analysis?

Prescriptive analytics is the process of using data to determine an optimal course of action.
By considering all relevant factors, this type of analysis yields recommendations for next
steps. Because of this, prescriptive analytics is a valuable tool for data-driven decision-
making.
Prescriptive analytics is the natural progression from descriptive and predictive analytics
procedures. It goes a step further to remove the guesswork out of data analytics. It also
saves data scientists and marketers time in trying to understand what their data means and
what dots can be connected to deliver a highly personalized and propitious user experience
to their audiences.

Example------

 Venture Capital: Investment Decisions

 Investment decisions, while often based on gut feelings, can be strengthened by

algorithms that weigh risks and recommend whether to invest.
 They tested the effectiveness of an algorithm’s decisions about which startups to
invest in as compared to angel investors' decisions.
 The findings were nuanced. The algorithm outperformed angel investors who were
less experienced at investing and less skilled at controlling their cognitive biases;
however, angel investors outperformed the algorithm when they were experienced
in investing and able to control their cognitive biases.

5. Nominal Scale: Definition

 A Nominal Scale is a measurement scale, in which numbers serve as “tags” or
“labels” only, to identify or classify an object. This measurement normally deals only
with non-numeric (quantitative) variables or where numbers have no value.
 Nominal scale possesses only the description characteristic which means it possesses
unique labels to identify or delegate values to the items. When it’s used for the
purpose of identification, there is a strict one-to-one correlation between an object
and the numeric value assigned to it.
 In nominal scale a variable is divided into two or more categories, for example,
agree/disagree, yes or no etc. It’s is a measurement mechanism in which answer to a
particular question can fall into either category.
 Nominal scale is qualitative in nature, which means numbers are used here only to
categorize or identify objects. For example, football fans will be really excited, as the
football world cup is around the corner! Have you noticed numbers on a jersey of a
football player? These numbers have nothing to do with the ability of players,
however, they can help identify the player.
 In nominal scale, numbers don’t define the characteristics related to the object,
which means each number is assigned to one object. The only permissible aspect
related to numbers in a nominal scale is “counting.”

 For example, let’s assume we have 5 colors, orange, blue, red, black and yellow. We
could number them in any order we like either 1 to 5 or 5 to 1 in ascending or
descending order. Here numbers are assigned to colors only to identify them.
 Another example of nominal scale from a research activity point to view is YES/NO
scale. It essentially has no order.

6. Ordinal measurement scale with example

The Ordinal scale includes statistical data type where variables are in order or rank but
without a degree of difference between categories. The ordinal scale contains
qualitative data; ‘ordinal’ meaning ‘order’. It places variables in order/rank, only

 .You can use an ordinal scale for research and survey purposes to understand
the higher or lower value of a data set. The scale identifies the magnitude of the
variables.

  It does not explain the distance between the variables. The ordinal scale cannot
answer “how much” different the two categories are.

 Like a Likert scale , the ordinal scale can measure frequency, importance,
satisfaction, likelihood, quality, and experience, etc.
 The measures in ordinal scale do not have absolute value hence the real
difference between adjacent values may not have the same meaning. For
example, the values in the age scale “less than 20” and “20-50” do not have the
same meaning as “50-80” and “over 80”.

For instance, in a horse race, we only see the ranking of the horses that won as 1st,
2nd, and 3rd. The ranks don’t tell us by how much distance did the first horse win or
the third horse lose.

7. Interval scale of measurement

The interval scale contains properties of nominal and ordered data, but the difference
between data points can be quantified. This type of data shows both the order of the
variables and the exact differences between the variables. They can be added to or
subtracted from each other, but not multiplied or divided. For example, 40 degrees is not 20
degrees multiplied by two.

This scale is also characterised by the fact that the number zero is an existing variable. In the
ordinal scale, zero means that the data does not exist. In the interval scale, zero has
meaning – for example, if you measure degrees, zero has a temperature.

Data points on the interval scale have the same difference between them. The difference on
the scale between 10 and 20 degrees is the same between 20 and 30 degrees. This scale is
used to quantify the difference between variables, whereas the other two scales are used to
describe qualitative values only. Other examples of interval scales include the year a car was
made or the months of the year.

8. Ratio scale of measurement

Ratio scales of measurement include properties from all four scales of measurement. The
data is nominal and defined by an identity, can be classified in order, contains intervals and
can be broken down into exact value. Weight, height and distance are all examples of ratio
variables. Data in the ratio scale can be added, subtracted, divided and multiplied.
Ratio scales also differ from interval scales in that the scale has a ‘true zero’.

The number zero means that the data has no value point. An example of this is height or
weight, as someone cannot be zero centimetres tall or weigh zero kilos – or be negative
centimetres or negative kilos. Examples of the use of this scale are calculating shares or
sales. Of all types of data on the scales of measurement, data scientists can do the most
with ratio data points.

9. Importance of financial analytics?

 Financial analytics is the creation of ad hoc analysis to answer specific business
questions and forecast possible future financial scenarios. The goal of financial
analytics is to shape the strategy for business through reliable, factual insight rather
than intuition. By offering detailed views of companies' financial data, financial
analytics provides the tools for firms to gain deep knowledge of key trends and take
action to improve their performance. 
 The application of analytics is crucial in financial services and other data-intensive
fields. Financial services businesses, including investment banks, generate and store
more data than just about any other business in any other sector, mainly because
finance is a transaction-heavy industry. While banks have, for many years, used data
to measure and quantify risk, data analysts are now taking on the role of influential
internal consultants, responsible for communicating to senior executives key insights
on how to improve the organization's overall profitability. 

10. Explain the different types of trends(curves) that can be fitted to almost every
data set?

11. Explain moving averages?

  A moving average is a technical indicator that investors and
traders use to determine the trend direction of securities.
 It is calculated by adding up all the data points during a specific
period and dividing the sum by the number of time periods.
 Moving averages help technical traders to generate trading
signals.

 Simple Moving Average (SMA)

The simple moving average (SMA) is a straightforward technical

indicator that is obtained by summing the recent data points in a given
set and dividing the total by the number of time periods. Traders use
the SMA indicator to generate signals on when to enter or exit a
market.

The closing prices for Stock ABC for the last five days are as follows:
$23, $23.40, $23.20, $24, and $25.50. The SMA is then calculated as
follows:

SMA = ($23 + $23.40 + $23.20 + $24 + $25.50) / 5

SMA = $23.82

Exponential Moving Average (EMA)

The other type of moving average is the exponential moving average

(EMA), which gives more weight to the most recent price points to make
it more responsive to recent data points. An exponential moving
average tends to be more responsive to recent price changes, as
compared to the simple moving average which applies equal weight to
all price changes in the given period.

12. Explain exponential smoothing method

Exponential smoothing is a time series forecasting method for univariate data that can
be extended to support data with a systematic trend or seasonal component.
Exponential smoothing forecasting methods are similar in that a prediction is a weighted
sum of past observations, but the model explicitly uses an exponentially decreasing
weight for past observations. Specifically, past observations are weighted with a
geometrically decreasing ratio.

Single Exponential Smoothing

Single Exponential Smoothing, SES for short, also called Simple Exponential
Smoothing, is a time series forecasting method for univariate data without a trend or
seasonality.

It requires a single parameter, called alpha (a), also called the smoothing factor .This

parameter controls the rate at which the influence of the observations at prior time steps
decay exponentially. Alpha is often set to a value between 0 and 1.

Double Exponential Smoothing

Double Exponential Smoothing is an extension to Exponential Smoothing that explicitly
adds support for trends in the univariate time series.

In addition to the alpha parameter for controlling smoothing factor for the level, an

additional smoothing factor is added to control the decay of the influence of the change
in trend called beta (b).

Triple Exponential Smoothing

Triple Exponential Smoothing is an extension of Exponential Smoothing that explicitly
adds support for seasonality to the univariate time series. In addition to the alpha and
beta smoothing factors, a new parameter is added called gamma (g) that controls the
influence on the seasonal component.

13. How to create dynamic charts in excel for 10 different companies with credit
rating?

You won’t always want to turn your data range into a table. Furthermore,
this feature isn’t available in pre-ribbon versions of Office. When either is
the case, there’s a more complex formula method. It relies on dynamic
ranges that update automatically, similar to the way the table does, but only
with a little help from you.

Using our earlier sheet, you’ll need five dynamic ranges: one for each
series and one for the labels. Instructions for creating the dynamic range
for the labels in column A follow. Then, use these instructions to create a
dynamic label for columns B through E. To create the dynamic range for
column A, do the following:

1. Click the Formulas tab.

2. Click the Define Names option in the Defined Names group.
3. Enter a name for the dynamic range, MonthLabels.
4. Choose the current sheet. In this case, that’s DynamicChart1. You can
use the worksheet, if you like. In general, it’s best to limit ranges to the
sheet, unless you intend to utilize them at the workbook level.
5. Enter the following formula: =OFFSET(DynamicChart1!
$A$2,0,0,COUNTA(DynamicChart1!$A:$A))
6. Click OK.

Now, repeat the above instructions, creating a dynamic range for each
series using the following range names and formulas:

 SmithSeries: =OFFSET(DynamicChart1!
$B$2,0,0,COUNTA(DynamicChart1!$B:$B)-1)
 JonesSeries: =OFFSET(DynamicChart1!
$C$2,0,0,COUNTA(DynamicChart1!$C:$C)-1)
 MichaelsSeries: =OFFSET(DynamicChart1!
$D$2,0,0,COUNTA(DynamicChart1!$D:$D)-1)
 HancockSeries: =OFFSET(DynamicChart1!
$E$2,0,0,COUNTA(DynamicChart1!$E:$E)-1)

Notice that first range reference starts with row 2. That’s because there’s a
row of headings in row 1. The second set of references refers to the entire
column, enabling the formula to accommodate all values in the column, not
just a specific range. The addition of the -1 component eliminates the
heading cell from the count. The first formula (for the labels in column A)
doesn’t have this component.

It’s important to remember that you must enter new data in a contiguous

manner. If you skip rows or columns, this technique won’t work as
expected.

You might be wondering why I added the Series label to each range name.
Using the name, alone, will confuse Excel. The series headings in row 1
are also names. Because the chart defaults will use the label headings in
each column for each series name, you can’t use those labels to name the
dynamic ranges. Don’t use the same labels for both your spreadsheet
headings and your dynamic range names.

Next, insert a column chart, as you did before. If you enter new data, the
chart won’t yet reflect it. That’s because the chart, by default, references a
specific data range, DynamicChart1:A1:E3. We need to change that
reference to the dynamic ranges we just created, as follows:

1. In the chart, right-click any column.

2. From the resulting submenu, choose Select Data.
3. In the list on the left, select Smith and then click Edit. (Remember the
naming conflict I mentioned? Excel uses the column heading (cell B1) to
name the series.)
4. In the resulting dialog, enter a reference to Smith’s dynamic range in the
Series Values control. In this case, that’s =DynamicChart1!SmithSeries.
5. Click OK.

Repeat the above process to update the remaining series to reflect their
dynamic ranges: DynamicChart1!JonesSeries; DynamicChart1!
MichaelsSeries; and DynamicChart1!HancockSeries.

Next, update the chart’s axis labels (column A), as follows:

1. In the Select Data Source dialog, click January (in the list to the right).
2. Then, click Edit.
3. In the resulting dialog, reference the axis label’s dynamic range,
DynamicChart1!MonthLabels.
4. Click OK.

You don’t have to update February; Excel does that for you. Now, start
entering data for March and watch the chart automatically update! Just
remember, you must enter data contiguously; you can’t skip rows or
columns.

This formula method is more complex than the table method. Be careful
naming the dynamic ranges and updating the series references. It’s easy to
enter typos. If the chart doesn’t update, check the range references