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Predictive analytics

Predictive analytics

Predictive analytics is a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyzes current and historical facts to make predictions about future or otherwise unknown events.

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Predictive analytics

APredictive analytics is a variety of statistical techniques from data mining, predictive modellingmodeling, and machine learning, that analyzeanalyzes current and historical facts to make predictions about future or otherwise unknown events.

Article

In an example, such as energy load forecasting used to predict energy demand, the workflow to develop a predictive analytics model uses vast amounts of data from energy producers, grid operators, historical load data, and energy traders. The data is then cleaned to remove outliers, data spikes, missing data, or anomalous points to create a unified energy load, temperature, and dew point data. TheThen the data is then used to develop an accurate predictive model using statistics, curve fitting tools, or machine learning in order to build and train a predictive model and a related neural network. ThisNew data can in turn usethen newbe dataused to test how well a predictive model performs. And, finallyFinally, the model can be integrated into a load forecasting system in a production environment to understand the accuracy of the model, and, once tuned, tocan be used in a production and forecasting systems.

...

Predictive analytics are not a monolith and; there are different models developed for design-specific functions. These include forecast models, classification models, outlier models, time series models, and clustering models.

...

Predictive analytic model types

Model
Description

Classification models

These models are anothera common predictive analytics model whichthat workswork by categorizing information based on historical data. These models are used in different industries because they can easily be retrained with new data and provide a broad analysis for answering questions. TheClassification models are often used in industries like finance and retail.

Clustering modelmodels

This is a modelThese thatmodels takestake data and sortssort it into different groups based on common attributes. The ability to divide data into different datasets based on specific attributes is useful in specific applications, like marketing, where marketers can divide a potential customer base based on common attributes.

Forecast models

These models are one of the most common predictive analytics models, which handle metric value predictions by estimating the values of new data based on learnings from historical data. ItThey isare often used to generate numerical values in historical data when there is none to be found. And oneOne of the strengths of forecast models and predictive analytics is the ability to input multiple parameters.

Outliers modelmodels

ThisThese modelmodels, unlike classification and forecast models whichthat work with historical data, workswork with anomalous data within a data set, and works by identifying the unusual data in isolation or in relation with different categories. These models are often useful in industries where identifying models are effective in detecting fraud based on their abilityabilities to find anomalies. And since an incidence of fraud is a deviation from the norm, the outlier model can likely predict fraud before it occurs and, in the case of financial or transactional fraud, can assess the amount of money lost, location, purchase history, time, and the nature of the purchase.

Time series model

This is a model that focuses on data in which focuses on data where time is the input parameter. The time series model works by using different data points to develop a numerical metric that works to predict trends within a specified period. TheseThis modelsmodel can be used to see how particular variables as they can change over time.

...

Predictive models are used for all kinds of applications, including weather forecastsforecasting, creating challenging and engaging video games, and translating voice to text for mobile phone messaging. These applications use statistical models of existing data to make predictions about future data. Descriptive models can determine relationships, patterns, and structures in data whichthat can draw conclusions about how changes in the underlying processes that generate the data will change the results. Predictive models build on these descriptive models to determine the likelihood of certain future outcomes given current conditions or a set of expected future conditions. Predictive analyticsmodels have also been used in industries such as finance, healthcare, pharmaceuticals, automotive, aerospace, and manufacturing.

...

Predictive analytics use cases

Use case
Description

Marketing campaigns

Predictive analytics areis used to determine customer responses or purchases, as well as promote cross-sell opportunities, and help businesses attract, retain, and grow profitable customers.

Operational efficiency

Companies can use predictive models to forecast inventory and manage resources. Airlines use predictive analytics to set ticket prices. Hotels try to predict the number of guests for any given night to maximize occupancy and increase revenue, and predictive analytics can enable organizations forto function more efficiently.

...

Predictive analytics and its application has in some cases been criticized and legally restricted. This has largely been in cases where the use of predictive analytics has resulted in perceived inequities of its outcomes. This has most commonly been in casessituations wherewhen predictive models have resulted in statistical discrimination against racial or ethnic groups in areas such as credit scoring, home lending, employment, or risk of criminal behavior. A famous, and illegal, example of this is the practice of redlining in home lending by banks. And becauseBecause of incidents and practices such as redlining, any predictive analytics models whichthat includesinclude information such as a person's race are now often excluded from predictive analytics.

Aleksander Holm
Aleksander Holm edited on 6 May, 2021
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Predictive analytics

Predictive analytics is a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyzes current and historical facts to make predictions about future or otherwise unknown events.

Article

Predictive analytics is a branch of advanced analytics used to make predictions about unknown future events. Predictive analytics uses techniques from data mining, statistics, modeling, machine learning, and artificial intelligence to analyze current data to make predictions. Those predictions are based on patterns found in historical and transactional data in order to identify possible opportunities, trends, or risks in the future. Through predictive analytics, organizations work to increase their revenue, increase or create a competitive advantage, and develop insights to improve economic performance and develop organizational differentiation.

Predictive analytics development workflow
An example of a predictive analytics workflow.

In an example, such as energy load forecasting used to predict energy demand, the workflow to develop a predictive analytics model uses vast amounts of data from energy producers, grid operators, historical load data, and energy traders. The data is then cleaned to remove outliers, data spikes, missing data, or anomalous points to create a unified energy load, temperature, and dew point data. The data is then used to develop an accurate predictive model using statistics, curve fitting tools, or machine learning in order to build and train a predictive model and a related neural network. This can in turn use new data to test how well a predictive model performs. And, finally, the model can be integrated into a load forecasting system in a production environment to understand the accuracy of the model and, once tuned, to be used in a production and forecasting systems.

Predictive analytics models

Predictive analytics are not a monolith and there are different models developed for design-specific functions. These include forecast models, classification models, outlier models, time series models, and clustering models.

Predictive analytic model types

Model
Description

Classification models

These models are another common predictive analytics model which works by categorizing information based on historical data. These models are used in different industries because they can easily be retrained with new data and provide a broad analysis for answering questions. The models are often used in industries like finance and retail.

Clustering model

This is a model that takes data and sorts it into different groups based on common attributes. The ability to divide data into different datasets based on specific attributes is useful in specific applications, like marketing, where marketers can divide a potential customer base based on common attributes.

Forecast models

These models are one of the most common predictive analytics models which handle metric value predictions by estimating the values of new data based on learnings from historical data. It is often used to generate numerical values in historical data when there is none to be found. And one of the strengths of forecast models and predictive analytics is the ability to input multiple parameters.

Outliers model

This model, unlike classification and forecast models which work with historical data, works with anomalous data within a data set, and works by identifying the unusual data in isolation or relation with different categories. These models are often useful in industries where identifying models are effective in detecting fraud based on their ability to find anomalies. And since an incidence of fraud is a deviation from the norm, the outlier model can likely predict fraud before it occurs and, in the case of financial or transactional fraud, can assess the amount of money lost, location, purchase history, time, and the nature of the purchase.

Time series model

This is a model which focuses on data where time is the input parameter. The time series model works by using different data points to develop a numerical metric that works to predict trends within a specified period. These models can be used to see how particular variables as they can change over time.

Use cases

Predictive models are used for all kinds of applications, including weather forecasts, creating challenging and engaging video games, and translating voice to text for mobile phone messaging. These applications use statistical models of existing data to make predictions about future data. Descriptive models can determine relationships, patterns, and structures in data which can draw conclusions about how changes in the underlying processes that generate the data will change the results. Predictive models build on these descriptive models to determine the likelihood of certain future outcomes given current conditions or a set of expected future conditions. Predictive analytics have also been used in industries such as finance, healthcare, pharmaceuticals, automotive, aerospace, and manufacturing.

Predictive analytics use cases

Use case
Description

Forecasting

Especially when used in manufacturing and utilization of resources in the supply chain, predictive modeling can be used to clean and optimize the quality of data used for forecasting in inventory management and supply chain optimization.

Fraud detection

Combining analytics methods can improve pattern detection and prevent criminal behavior. Behavioral analytics examines all actions on a network in real time to spot abnormalities that may indicate fraud, zero-day vulnerabilities, and persistent threats.

Marketing campaigns

Predictive analytics are used to determine customer responses or purchases, as well as promote cross-sell opportunities, and help businesses attract, retain, and grow profitable customers.

Operational efficiency

Companies can use predictive models to forecast inventory and manage resources. Airlines use predictive analytics to set ticket prices. Hotels try to predict the number of guests for any given night to maximize occupancy and increase revenue, and predictive analytics can enable organizations for function more efficiently.

Predictive maintenance

Predictive analytics can be used for organizations to predict when routine equipment maintenance will be required and can be scheduled before a problem or malfunction arises.

Risk reduction

Predictive analytics can be used in credit scores, insurance claims, and debt collection to assess and determine the likelihood of future defaults and manage risk when lending.

Trading

Active traders use a variety of metrics based on past events in the decision making process on whether to buy or sell a security. Moving averages, bands, and breakpoints are all based on historical data and are used to forecast future price movements.

Criticism

Predictive analytics and its application has in some cases been criticized and legally restricted. This has largely been in cases where the use of predictive analytics has resulted in perceived inequities of its outcomes. This has most commonly been in cases where predictive models have resulted in statistical discrimination against racial or ethnic groups in areas such as credit scoring, home lending, employment, or risk of criminal behavior. A famous, and illegal, example of this is the practice of redlining in home lending by banks. And because of incidents and practices such as redlining, any predictive analytics models which includes information such as a person's race are now often excluded from predictive analytics.

Predictive analytics companies

People

Name
Role
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Predictive Analytics

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Further reading

Title
Author
Link
Type
Date

How different predictive analytics models work | Selerity

Web

December 12, 2019

Machine Learning Vs. Predictive Analytics: Which Is Better For Business?

Eric Vardon

Web

June 12, 2020

Predictive Analytics Definition

Clay Halton

Web

May 5, 2021

Predictive analytics: Transforming data into future insights

John Edwards

Web

August 16, 2019

Predictive Analytics: What it is and why it matters

Web

December 4, 2020

What Is Predictive Analytics and Who Is Winning With It

River Logic

Web

What Is Predictive Analytics? - 3 Things You Need to Know

Web

What Is Predictive Analytics? | Google Cloud

Web

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Predictive analytics

A variety of statistical techniques from data mining, predictive modelling, and machine learning, that analyze current and historical facts to make predictions about future or otherwise unknown events.

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Predictive analytics

Predictive analytics is a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyzes current and historical facts to make predictions about future or otherwise unknown events.

People

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Predictive Analytics

Founder

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Golden AI
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 Predictive analytics

Predictive analytics is a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyzes current and historical facts to make predictions about future or otherwise unknown events.

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