1. What is Forecast Variance?

Forecast variance measures the difference between actual outcomes and predicted values. It quantifies the accuracy of forecasting models by calculating the average squared difference between actual and forecasted values.

2. How Does the Calculator Work?

The calculator uses the forecast variance formula:

Where:

• \( Actual \) — Observed or real values
• \( Forecast \) — Predicted or estimated values
• \( n \) — Number of observations

Explanation: The formula calculates the average of squared differences between actual and forecasted values, providing a measure of forecasting accuracy.

3. Importance of Forecast Variance Calculation

Details: Forecast variance is crucial for evaluating forecasting model performance, identifying systematic errors, and improving prediction accuracy in various fields including finance, supply chain management, and weather forecasting.

4. Using the Calculator

Tips: Enter comma-separated values for both actual and forecast measurements. Ensure both lists have the same number of values. The calculator will compute both variance and standard deviation.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between variance and standard deviation?
A: Variance measures the average squared deviation from the mean, while standard deviation is the square root of variance and provides a measure in the original units.

Q2: When is forecast variance most useful?
A: It's particularly valuable when comparing different forecasting models or tracking forecasting performance over time.

Q3: What does a high variance indicate?
A: High variance suggests that forecasts are frequently far from actual values, indicating poor forecasting accuracy.

Q4: Can variance be negative?
A: No, variance cannot be negative since it's calculated from squared differences.

Q5: How is this different from mean squared error?
A: Forecast variance is essentially the same as mean squared error (MSE) when comparing actual vs forecasted values.