# 6. Tips to using `auto_arima`

¶

The `auto_arima`

function fits the best `ARIMA`

model to a univariate time
series according to either
AIC,
AICc,
BIC or
HQIC.
The function performs a search (either stepwise or parallelized)
over possible model orders within the constraints provided.

The `auto_arima`

function can be daunting. There are a lot of parameters to
tune, and the outcome is heavily dependent on a number of them. In this section,
we lay out several considerations you’ll want to make when you fit your ARIMA
models.

## 6.1. Understand `p`

, `d`

, and `q`

¶

ARIMA models are made up of three different terms:

`p`

: The order of the auto-regressive (AR) model.`d`

: The degree of differencing.`q`

: The order of the moving average (MA) model.

Often times, ARIMA models are written in the form \(ARIMA(p, d, q)\), where a model with no differencing term, e.g., \(ARIMA(1, 0, 12)\), would be an ARMA (made up of an auto-regressive term and a moving average term, but no integrative term).

### 6.1.1. Understanding differencing¶

An integrative term, `d`

, is typically only used in the case of non-stationary
data. The value of `d`

determines the number of periods to lag the response prior
to computing differences. E.g.,

```
from pmdarima.utils import c, diff
# lag 1, diff 1
x = c(10, 4, 2, 9, 34)
diff(x, lag=1, differences=1)
# Returns: array([ -6., -2., 7., 25.], dtype=float32)
```

Note that `lag`

and `differences`

are not the same!

```
diff(x, lag=1, differences=2)
# Returns: array([ 4., 9., 18.], dtype=float32)
diff(x, lag=2, differences=1)
# Returns: array([-8., 5., 32.], dtype=float32)
```

The `lag`

corresponds to the offset in the time period lag, whereas the
`differences`

parameter is the number of times the differences are computed.
Therefore, e.g., for `differences=2`

, the procedure is essentially computing
the difference twice:

```
x = c(10, 4, 2, 9, 34)
# 1
x_lag = x[1:] # first lag
x = x_lag - x[:-1] # first difference
# x = [ -6., -2., 7., 25.]
# 2
x_lag = x[1:] # second lag
x = x_lag - x[:-1]
# x = [ 4., 9., 18.]
```

## 6.2. Enforcing stationarity¶

The `pmdarima.arima.stationarity`

sub-module defines various tests of stationarity for
testing a null hypothesis that an observable univariate time series is stationary around
a deterministic trend (i.e. trend-stationary).

A time series is stationary when its mean, variance and auto-correlation, etc.,
are constant over time. Many time-series methods may perform better when a time-series
is stationary, since forecasting values becomes a far easier task for a
stationary time series. ARIMAs that include differencing (i.e., `d > 0`

)
assume that the data becomes stationary after differencing. This is called
**difference-stationary**. Auto-correlation plots are an easy way to determine
whether your time series is sufficiently stationary for modeling. If the plot
does not appear relatively stationary, your model will likely need a
differencing term. These can be determined by using an Augmented Dickey-Fuller
test, or various other statistical testing methods. Note that `auto_arima`

will automatically determine the appropriate differencing term for you by default.

```
import pmdarima as pm
from pmdarima import datasets
y = datasets.load_lynx()
pm.plot_acf(y)
```

We can examine a time-series’ auto-correlation plot given the code above. However, to more quantitatively determine whether we need to difference our data in order to make it stationary, we can conduct an ADF test:

```
from pmdarima.arima.stationarity import ADFTest
# Test whether we should difference at the alpha=0.05
# significance level
adf_test = ADFTest(alpha=0.05)
p_val, should_diff = adf_test.is_stationary(y) # (0.99, False)
```

The verdict, per the ADF test, is that we should *not* difference. Pmdarima also
provides a more handy interface for estimating your `d`

parameter more directly:

```
from pmdarima.arima.utils import ndiffs
# Estimate the number of differences using an ADF test:
n_adf = ndiffs(y, test='adf') # -> 0
# Or a KPSS test (auto_arima default):
n_kpss = ndiffs(y, test='kpss') # -> 0
# Or a PP test:
n_pp = ndiffs(y, test='pp') # -> 0
assert n_adf == n_kpss == n_pp == 0
```

The easiest way to make your data stationary in the case of ARIMA models is
to allow `auto_arima`

to work its magic, estimate the appropriate `d`

value, and difference the time series accordingly. However, other
common transformations for enforcing stationarity include (sometimes in
combination with one another):

- Square root or N-th root transformations
- De-trending your time series
- Differencing your time series one or more times
- Log transformations

When in doubt, let the `auto_arima`

function do the heavy lifting for you. Read more on
difference stationarity in this Duke article.

## 6.3. Understand `P`

, `D`

, `Q`

and `m`

¶

Seasonal ARIMA models have three parameters that heavily resemble our `p`

, `d`

and `q`

parameters:

`P`

: The order of the seasonal component for the auto-regressive (AR) model.`D`

: The integration order of the seasonal process.`Q`

: The order of the seasonal component of the moving average (MA) model.

`P`

and `Q`

and be estimated similarly to `p`

and `q`

via `auto_arima`

, and
`D`

can be estimated via a Canova-Hansen test, however `m`

generally requires subject matter
knowledge of the data.

### 6.3.1. Estimating the seasonal differencing term, `D`

¶

Seasonality can manifest itself in timeseries data in unexpected ways. Sometimes trends are partially dependent on the time of year or month. Other times, they may be related to weather patterns. In either case, seasonality is a real consideration that must be made. The pmdarima package provides a test of seasonality for including seasonal terms in your ARIMA models.

We can use a Canova-Hansen test to estimate our seasonal differencing term:

```
from pmdarima.datasets import load_lynx
from pmdarima.arima.utils import nsdiffs
# load lynx
lynx = load_lynx()
# estimate number of seasonal differences
D = nsdiffs(lynx,
m=10, # commonly requires knowledge of dataset
max_D=12,
test='ch') # -> 0
```

By default, this will be estimated in `auto_arima`

if `seasonal=True`

. Make
sure to pay attention to the `m`

and the `max_D`

parameters.

### 6.3.2. Setting `m`

¶

The `m`

parameter is the number of observations per seasonal cycle, and is
one that must be known apriori. Typically, `m`

will correspond to some
recurrent periodicity such as:

- 7 - daily
- 12 - monthly
- 52 - weekly

Depending on how it’s set, it can dramatically impact the outcome of an
ARIMA model. For instance, consider the wineind dataset when fit with
`m=1`

vs. `m=12`

:

```
import pmdarima as pm
data = pm.datasets.load_wineind()
train, test = data[:150], data[150:]
# Fit two different ARIMAs
m1 = pm.auto_arima(train, error_action='ignore', seasonal=True, m=1)
m12 = pm.auto_arima(train, error_action='ignore', seasonal=True, m=12)
```

The forecasts these two models will produce are wildly different (code to reproduce):

```
import matplotlib.pyplot as plt
fig, axes = plt.subplots(1, 2, figsize=(12, 8))
x = np.arange(test.shape[0])
# Plot m=1
axes[0].scatter(x, test, marker='x')
axes[0].plot(x, m1.predict(n_periods=test.shape[0]))
axes[0].set_title('Test samples vs. forecasts (m=1)')
# Plot m=12
axes[1].scatter(x, test, marker='x')
axes[1].plot(x, m12.predict(n_periods=test.shape[0]))
axes[1].set_title('Test samples vs. forecasts (m=12)')
plt.show()
```

As you can see, depending on the value of `m`

, you may either get a very good model
or a very bad one!!! The author of R’s `auto.arima`

, Rob Hyndman, wrote a very good
blog post on the period
of a seasonal time series.

## 6.4. Parallel vs. stepwise¶

The `auto_arima`

function has two modes:

- Stepwise
- Parallelized (slower)

The parallel approach is a naive, brute force grid search over various combinations
of hyper parameters. It will commonly take longer for several reasons. First of all,
there is no intelligent procedure as to how model orders are tested; they are all
tested (no short-circuiting), which can take a while. Second, there is more overhead
in model serialization due to the method in which `joblib`

parallelizes operations.

The stepwise approach follows the strategy laid out by Hyndman and Khandakar in
their 2008 paper,
*“Automatic Time Series Forecasting: The forecast Package for R”*.

**Step 1**: Try four possible models to start:

- \(ARIMA(2, d, 2)\) if
`m = 1`

and \(ARIMA(2, d, 2)(1, D, 1)\) if`m > 1`

- \(ARIMA(0, d, 0)\) if
`m = 1`

and \(ARIMA(0, d, 0)(0, D, 0)\) if`m > 1`

- \(ARIMA(1, d, 0)\) if
`m = 1`

and \(ARIMA(1, d, 0)(1, D, 0)\) if`m > 1`

- \(ARIMA(0, d, 1)\) if
`m = 1`

and \(ARIMA(0, d, 1)(0, D, 1)\) if`m > 1`

The model with the smallest AIC (or BIC, or AICc, etc., depending on the minimization criteria) is selected. This is the “current best” model.

**Step 2**: Consider a number of other models:

- Where one of \(p\), \(q\), \(P\) and \(Q\) is allowed to vary by \(\pm 1\) from the current best model
- Where \(p\) and \(q\) both vary by \(\pm 1\) from the current best model
- Where \(P\) and \(Q\) both vary by \(\pm 1\) from the current best model

Whenever a model with a lower information criteria is found, it becomes the new current best model, and the procedure is repeated until it cannot find a model close to the current best model with a lower information criterion.

When in doubt, `stepwise=True`

is encouraged.