When You Should Choose To Use Moving Averages In An Analysis

Moving averages can capture important trends in volatile data

Let’s face it — not every manager will understand the mechanics behind trends within a given set of data. They do know trends are an essential topic behind executing a strategy.

Trending metrics indicate what kind of performance is occurring for a given set of data. Are sales improving over time? Is a GPA improving during a school year? Is your football defense improving its ability to reduce the yards gained by the opposing team’s offense? Each of these situations may differ, but they are asking the same sort of question — how is data for something of interest (GPA, football team, business unit) is performing. Knowing that change in performance sparks discussion on what decisions must be made next.

If you have time-series data, a focus on moving averages can be helpful for identifying a trend, but also set a stage for advanced analytics techniques. Let’s take a brief look at how they can be used in this post.

Defining Moving Averages

First a definition. Moving averages are a series of averages linked to time periods of interest divided into small units. The smaller units help to note if the performance is actually changing…