Currencies Projection using Linear Regression
Below is an example of how to calculate projection of currencies using linear regression. This method is used by Protheus.
|
Period, variable x (independent) |
Value, variable y (dependent) |
x2 |
x * y |
1 |
1.55 |
1 |
1.55 |
|
2 |
1.58 |
4 |
3.16 |
|
Sum |
3 |
3.13 |
5 |
4.71 |
To project the currency value, use the straight line equation:
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Example:
y = 80 + 4x
See the linear equation chart for the trend:
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First, \"b\" is calculated:
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Where:
n = number of periods. In this example, it is 2, which is equal to the number of days to go back, before the system date.
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Then, \"a\" is calculated:
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Where:
n = number of periods. In this example, it is 2, which is equal to the number of days to go back, before the system date.
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Then, the straight line equation is formed:
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To find the value of period 3:
y = 1.52 + 0.03*3 = 1.61
To find the value of period 4:
y = 1.52 + 0.03*4 = 1.64
To find the value of period 5:
y = 1.52 + 0.03*5 = 1.67
To find the value of period 6:
y = 1.52 + 0.03*6 = 1.70
d4ab49a2-8aac-4780-b7f4-09f146fb48beTip: Period refers to a day, a month, a year etc. In the above example, only two periods were used as regression but more periods can be used. |