Question

Explain the difference between Simple moving average and Weighted moving average.

Explain the difference between Coefficient of correlation and Coefficient of determination.

Answer 1

Explain the difference between Simple moving average and Weighted moving average.

Simple moving average

In simple moving average, we take the average of previous periods as the forecast of the next period.

Weighted moving average

In weighted moving average, we multiply certain weights to the period to get the forecast of the next period and the sum of weights is always equal to 1.

Example:

Month Demand Moving Avg 520 490 550 580 520 February March April May June July August September 600 540 420 576.67 510 533.33 610 510 Total A. 3 month Moving Average May = (Feb + Mar + Apr )/3 May = (520+490+550)/3 = 520 June = (490+550+580)/3 = = 540 July = ( April + May + June) / 3 July 576.67 Month Demand Forecast(weighte 520 490 550 580 526 February March April May June July August September 600 553 420 584 510 506 610 501 Total B. Weighted average May = (Feb * 0.2) + (Mar * 0.3) + (Apr * 0.5) May 526 June = (Mar * 0.2) + (Apr * 0.3) + (May * 0.5) 553 June July = (April * 0.2) + (May * 0.3) + (June * 0.5) July 584

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