Trend lines are typically used to observe the relationship or correlation between two variables, where the shape of the trend line indicates the type of the relationship between the variables; for example, how is our profit value related to our marketing expenses, or how is our profit value related to the discounts that we are offering?
Further, trend lines can also be used to indicate the general pattern or direction of time series data; for example, to plot the change in variables such as sales, profit or cost over a period of time. While line charts, when used to show such changes, may show fluctuations in values over a period of time, a trend line plotted in addition to this line chart would also help us understand the general direction of the change.
At times, trend lines can also be used for basic forecasting, based on an extrapolation of the trend line.
Let us go through the following recipe to see how to generate a trend line.
