How to read ACF graph ? What is lag in ACF graph?
Question
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Answer ( 1 )
ACF plot is an plot of a autocorrelation function which gives us values of correlation
of any series with its lagged values. It shows how well the present value of the series is
related with its past values.
The x- axis in the above image shows the no of lags and the y-axis shows the correlation amount.
The band which you see is the confidence interval band.So, the values which surpass that band
are said to be significant.Here, we can see that the values after the 3rd lag are dropping in significance.
So,we can say that any value in the time series depend upon at most 3 previous values.
The 0th lag will always have a correlation of 1 as the correlation of the series with itself is 1.