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Forecasting using linear regression

This recipe illustrates the method of estimating the future values based on a linear trend. The linear trend is calculated using the least-square distance, a statistical method of determining the line that fits the best through the set of values in the chart, as displayed in the following figure: Mathematically, linear regression can be represented by a regression line, y = ax + b, where y is the value of the y-intercept for a value of x.

Linear regression is often used in a way that x is a period and y is the value in a particular time, for example, a month.

Most importantly, the regression line is used to forecast ...

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