Components of a time series
Before we start analyzing and visualizing time series, we need to understand the structure of a time series. Any time series can contain some or all of the following components:
- Trend
- Seasonal
- Cyclical
- Irregular
These components can be mixed in different ways, but two very commonly assumed ways are additive (Y = Trend + Seasonal + Cyclical + Irregular) and multiplicative (Y = Trend * Seasonal * Cyclical * Irregular).
The trend component
The trend is a long-term change in the mean of a time series. It is the smooth and steady movement of a time series in a particular direction. When the time series moves upward, we say there is an upward or increasing trend, while when it moves downward, we say there is a downward or decreasing trend. At the time of writing, if we think about the revenue of Tesla over the years, as shown in the following figure, we can see that it has been increasing consistently for the last few years:
...
