1.
Exploratory Data Analysis
1.3. EDA Techniques 1.3.3. Graphical Techniques: Alphabetic 1.3.3.1. Autocorrelation Plot


Autocorrelation Plot 
The following is a sample autocorrelation plot.


Conclusions 
We can make the following conclusions from this plot.


Discussion 
Note that with the exception of lag 0, which is always 1 by
definition, almost all of the autocorrelations fall within the 95%
confidence limits. In addition, there is no apparent pattern
(such as the first twentyfive being positive and the second
twentyfive being negative). This is the abscence of a pattern we
expect to see if the data are in fact random.
A few lags slightly outside the 95% and 99% confidence limits do not neccessarily indicate nonrandomness. For a 95% confidence interval, we might expect about one out of twenty lags to be statistically significant due to random fluctuations. There is no associative ability to infer from a current value Y_{i} as to what the next value Y_{i+1} will be. Such nonassociation is the essense of randomness. In short, adjacent observations do not "corelate", so we call this the "no autocorrelation" case. 