Random Factor Analysis

AAA

DEFINITION of 'Random Factor Analysis'

A statistical analysis performed to determine the origin of random data figures collected. Random factor analysis is used to decipher whether the outlying data is caused by an underlying trend or just simply random occurring events and attempts to explain the apparently random data. It uses multiple variables to more accurately interpret the data.

INVESTOPEDIA EXPLAINS 'Random Factor Analysis'

This data is used to help companies better focus their plans on the actual problem. If the random data is caused by an underlying trend or random norecurring event, that trend will need to be addressed and remedied accordingly. For example, consider a random event such as a volcano eruption. Sales of breathing masks may skyrocket, and if someone was just looking at the sales data over a multi-year period this would look like an outlier, but analysis would attribute this data to this random event.

RELATED TERMS
  1. Survival Analysis

    A branch of statistics which studies the amount of time that ...
  2. Investment Analysis

    The study of how an investment is likely to perform and how ...
  3. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  4. Trend

    The general direction of a market or of the price of an asset. ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
Related Articles
  1. Active Trading Fundamentals

    Simple Moving Averages Make Trends Stand Out

    The moving average is easy to calculate and, once plotted on a chart, is a powerful visual trend-spotting tool.
  2. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  3. Trading Strategies

    Introduction To Technical Analysis Price Patterns

    To "find your game" in technical analysis, you need to be able to recognize reversals and continuations as they form.
  4. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  5. Active Trading

    Peak-and-Trough Analysis

    Prices never move in straight lines, so it's time to learn about this powerful trend-following technique.
  6. Investing

    Using Technical Analysis In The Gold Markets

    The quest for this shiny commodity has made millionaires of paupers and, on the flip side, ruined many an investor.
  7. Personal Finance

    Testing 3 Types Of Analysts

    Different clients require different research reports. Which type of analyst do you need?
  8. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  9. Trading Strategies

    How far back in a stock's history should you go when gauging its volatility?

    Discover why it can be difficult for investors to figure out how far back to go into a stock's history when gauging its volatility.
  10. Trading Strategies

    What are common examples of Serial Correlation in finance?

    Take a deeper look at serial correlation in finance, and find out why most attempts at discovering serial correlation among asset prices have failed.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center