Hands-On Machine Learning for Algorithmic Trading

Dimensionality reduction

In linear algebra terms, the features of a dataset create a vector space whose dimensionality corresponds to the number of linearly independent columns (assuming there are more observations than features). Two columns are linearly dependent when they are perfectly correlated so that one can be computed from the other using the linear operations of addition and multiplication.

In other words, they are parallel vectors that represent the same rather than different directions or axes and only constitute a single dimension. Similarly, if one variable is a linear combination of several others, then it is an element of the vector space created by those columns, rather than adding a new dimension of its own.

The number of ...