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Understanding forecast in Cognos Analytics: How to predict future trends?

By Rodrigo de Andrade posted Mon December 05, 2022 07:51 AM

  


Making decisions knowing in advance what will happen in the future is everyone's wish. And we currently have only two ways to try to predict something: by consulting crystal balls and other supernatural powers, or by using statistics and artificial intelligence that enable us to make better data-driven decisions.

 

The good news is that the second option is already a reality and is available on Cognos Analytics with Watson. Best of all, you don't need to understand absolutely anything about statistics or data science, since IBM has created a very easy and user friendly functionality that allows a line business user to use the forecast with just one click

  

What is Time Series Forecasting?

Time series forecasting is a technique that uses a machine learning or statistical approach to analyze data from the past, identifies a pattern and tries to predict a trend that allows suggesting future results

 

Where can the Forecast be applied in real life?

Imagine if you could predict how much you will sell this month. Or maybe if you could know how much of a specific product you need to have in stock to avoid losing sales and have a better inventory?

Okay, sales-related examples don't convince you and you need a stronger reason. So imagine if you could estimate the future value of corporate stocks at a specified time interval. Or if you can forecast the number of people infected by a virus during a pandemic like Covid? These and many other examples can be potential scenarios for using time series forecasting.

 

Univariate x Multivariate Forecast

Until it’s 11.2.2 release, Cognos Analytics already offered what we call univariate forecast, which means that the user can use the forecast feature considering just one factor (in addition to time) as an input parameter for Cognos Artificial intelligence to predict future results.

 In the 11.2.3 release, Cognos Analytics with Watson introduced the unprecedented capability called Multivariate Time-series Forecasting. It means, that now the user can forecast using multiple parameters.

 

A simple and didactic use case to understand it in practice:

Imagine that a logistics company wants to predict the volume of goods that will arrive at its warehouse in the coming weeks. This company can use the simple time series forecast to analyze the volume of goods for a certain period in the past and find a trend that allows predicting what will happen in the future. Note that I'm only talking about one parameter: The volume of goods. This is the univariate forecast.

However, it would also be nice if the forecast considers other parameters, like the weather, the cost of transport, inflation, or even different seasons. In this case, as we are saying that all these other parameters can influence the result, the artificial intelligence will use the multivariate forecast

 

How to forecast in Cognos Analytics?

Despite the technical complexity behind how time series forecasting models works, IBM allows every Cognos Analytics user, even without any technical or statistical knowledge, to become a forecasting expert.

 That's because Cognos Analytics offers an intuitive experience that automatically selects the model (from a set of nine different model types) and makes forecasting feature easy to use, even if you are not familiar with time series.


To use forecasting, you first need to have a line, bar, or column visualization on your dashboard. When data is recognized as a time series, data preparation is automated and you will see a Forecast icon in the upper right corner of this visualization.

When you click on this icon, you will see the Cognos Analytics Panel on the right side of your screen

Just enable the Forecast option and Cognos will do the rest for you. The Forecast will be displayed in the visualization as extensions of the current data.



If you, for some reason, do not want to use the parameters chosen automatically by Cognos Analytics, you can modify your forecasts by setting a number of period and confidence level options in the Forecast dialog box.



Forecast periods: This is the number of steps to forecast ahead. The default value is Auto, which is 20% of the length of the historical data.

Ignored last periods: Ignores a specified number of data points at the end of a time series and computing the forecasts. The default value is 0.

Confidence level: The certainty with which the true value is expected to be within the given range. The default is 95% but you can also select 90% or 99%.

Seasonal period: In times series forecasting the word season refers to variations that occur at specific time intervals, like something that happens daily, weekly, monthly, or any other regular interval not longer than one year. The default value is Auto. Auto automatically detects seasonality by building multiple models with different seasonal periods and choosing the best one.

  

If you want to know details on the model and data used for forecast, like the information about the Trend and Seasonality type that is selected for estimating the time series data or even if you want to see the Accuracy measures, you can click on Statistics Details. You will see a table at the bottom of each visualization with all interesting information about this generated forecast



Now you can tell me, is it easy or not to predict the future without having a crystal ball now?


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