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Residual variance rate

Measures the share of the residual component of a time series

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Written by Anthony Cabos
Updated over 4 years ago

Definition

The residual variance rate represents the part of the variation of a time series due to residuals (or noise). This corresponds to the variance of the compared component to the variance of the time series. It is rebased to 100 to know the proportion of this component over the time series.

Calculation

Residual variance rate = variance of the residual / (variance of the trend + variance of the trend + variance of the residual)

Example

For a market that have sales and the following breakdown:

We thus have a residual variance rate of 37%.

Terminology

The trend variance rate can be translated into English as "Residual Variance Ratio".

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