1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.

ipynb - Colaboratory

keyboard_arrow_down Petroleum Price Prediction Models

The following models would be developed:

GARCH with NARNN and vice versa

ARIMA with NARNN vice versa

SARIMA with NARNN vice versa

Exponential Smoothing with NARNN and vice versa.

NB: The residuals from the base model would be used to train the other model

The existing models serve as a Benchmark ( GARCH, ARIMA and SARIMA, Exponential
Smoothing)

1 # Load Libraries
2 import numpy as np # Mathematical Computations
3 import pandas as pd # Data Manipulation
4 import matplotlib.pyplot as plt # Data Visualization
5 import seaborn as sns # Advance Data Visualizations
6 import plotly.express as px # Advance and Interactive Data Visualizations

keyboard_arrow_down Load Dataset and Preprocessing

1 # Pick the data from local machine

2 from google.colab import files
3 file_path = files.upload()

Choose Files petroleum_products.xlsx

petroleum_products.xlsx(application/vnd.openxmlformats-officedocument.spreadsheetml.sheet) -
10200 bytes, last modified: 12/21/2023 - 100% done
Saving petroleum_products.xlsx to petroleum_products.xlsx

1 # Load the dataset into a useable dataframe format

2 df = pd.read_excel('petroleum_products.xlsx', index_col='Date')
3 df.head()

GASOLINE DIESEL LPG

Date

2019-01-01 4.89 4.90 4.99

2019-02-01 4.90 4.91 4.94

2019-03-01 5.15 5.16 5.01

2019-04-01 5.19 5.19 5.39

2019-05-01 5.20 5.21 4.97

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1 # Rename columns for convinience
2 df = df.rename(columns = {'GASOLINE': 'Gasoline', 'DIESEL': 'Diesel'})
3 df.columns

Index(['Gasoline', 'Diesel', 'LPG'], dtype='object')

keyboard_arrow_down Data Selection

1 # Select a Product and Model Type to Analyze

product: Gasoline
2 product = "Gasoline" # @param ["Gasoline", "Diesel
3 print(f"Selected Product: {product}")

Selected Product: Gasoline

keyboard_arrow_down ARIMA - NARNN Model

keyboard_arrow_down Estimate The Mean Equation

1 ! pip install pmdarima

2 import pmdarima as pm
3 import statsmodels.api as sm
4 import matplotlib.pyplot as plt
5 from statsmodels.graphics.tsaplots import plot_acf, plot_pacf

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Installing collected packages: pmdarima
Successfully installed pmdarima-2.0.4

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1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.ipynb - Colaboratory
1 from statsmodels.tsa.stattools import adfuller
2 # Perform the ADF test
3 def perform_adf_test(ds):
4 result = adfuller(ds)
5 # Extract and print test statistics
6 adf_statistic = result[0]
7 p_value = result[1]
8 critical_values = result[4]
9
10 print(f'ADF Statistic: {adf_statistic}')
11 print(f'p-value: {p_value}')
12 print(f'Critical Values: {critical_values}')
13
14 # Check the p-value against the significance level (e.g., 0.05)
15 if p_value <= 0.05:
16 print("Reject the null hypothesis. The time series is likely stationary.")
17 else:
18 print("Fail to reject the null hypothesis. The time series may not be stationary.")
19
20 perform_adf_test(df[product])

ADF Statistic: -0.4714985407350731

p-value: 0.8974593895763701
Critical Values: {'1%': -3.5506699942762414, '5%': -2.913766394626147, '10%': -2.59462404
Fail to reject the null hypothesis. The time series may not be stationary.

1 # Diffrence the data

2 differenced_ds = df[product].diff(1).dropna()
3 perform_adf_test(differenced_ds)

ADF Statistic: -6.54915636272955

p-value: 8.941192716390255e-09
Critical Values: {'1%': -3.5506699942762414, '5%': -2.913766394626147, '10%': -2.59462404
Reject the null hypothesis. The time series is likely stationary.

1 def find_arima_lags(data, max_ar=5, max_ma=5, figsize=(12, 3)):

2 # Plot ACF and PACF
3 fig, (ax1, ax2) = plt.subplots(1, 2, figsize=figsize)
4
5 plot_acf(data, ax=ax1)
6 plot_pacf(data, ax=ax2)
7
8 ax1.set_title('Autocorrelation Function (ACF)')
9 ax2.set_title('Partial Autocorrelation Function (PACF)')
10
11 plt.show()
12
13 find_arima_lags(differenced_ds)

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1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.ipynb - Colaboratory

1 ar_model = pm.auto_arima(differenced_ds, s=0)

2 print(ar_model.summary())

SARIMAX Results
==============================================================================
Dep. Variable: y No. Observations: 59
Model: SARIMAX(0, 0, 2) Log Likelihood -71.805
Date: Wed, 03 Jan 2024 AIC 149.611
Time: 17:19:11 BIC 155.844
Sample: 02-01-2019 HQIC 152.044
- 12-01-2023
Covariance Type: opg
==============================================================================
coef std err z P>|z| [0.025 0.975]
------------------------------------------------------------------------------
ma.L1 0.2512 0.068 3.721 0.000 0.119 0.384
ma.L2 -0.2579 0.151 -1.705 0.088 -0.554 0.039
sigma2 0.6648 0.042 15.793 0.000 0.582 0.747
===================================================================================
Ljung-Box (L1) (Q): 0.05 Jarque-Bera (JB): 1182.36
Prob(Q): 0.82 Prob(JB): 0.00
Heteroskedasticity (H): 23.10 Skew: 3.51
Prob(H) (two-sided): 0.00 Kurtosis: 23.77
===================================================================================

Warnings:
[1] Covariance matrix calculated using the outer product of gradients (complex-step).

1 from statsmodels.tsa.arima.model import ARIMA

2 # Fit ARIMA(2,2) model
3 order = (0, 1, 2) # (p, d, q) order
4 arima_model = ARIMA(df[product], order=order)
5 arima_results = arima_model.fit()
6
7 # Display model summary
8 print(arima_results.summary())

SARIMAX Results
==============================================================================
Dep. Variable: Gasoline No. Observations: 60
Model: ARIMA(0, 1, 2) Log Likelihood -71.805
Date: Wed, 03 Jan 2024 AIC 149.611
Time: 19:06:35 BIC 155.844
Sample: 01-01-2019 HQIC 152.044
- 12-01-2023
Covariance Type: opg
==============================================================================
coef std err z P>|z| [0.025 0.975]
------------------------------------------------------------------------------
ma.L1 0.2512 0.068 3.721 0.000 0.119 0.384
ma.L2 -0.2579 0.151 -1.705 0.088 -0.554 0.039
sigma2 0.6648 0.042 15.793 0.000 0.582 0.747
===================================================================================

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1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.ipynb - Colaboratory
Ljung-Box (L1) (Q): 0.05 Jarque-Bera (JB): 1182.36
Prob(Q): 0.82 Prob(JB): 0.00
Heteroskedasticity (H): 23.10 Skew: 3.51
Prob(H) (two-sided): 0.00 Kurtosis: 23.77
===================================================================================

Warnings:
[1] Covariance matrix calculated using the outer product of gradients (complex-step).
/usr/local/lib/python3.10/dist-packages/statsmodels/tsa/base/tsa_model.py:473: ValueWarni
self._init_dates(dates, freq)
/usr/local/lib/python3.10/dist-packages/statsmodels/tsa/base/tsa_model.py:473: ValueWarni
self._init_dates(dates, freq)
/usr/local/lib/python3.10/dist-packages/statsmodels/tsa/base/tsa_model.py:473: ValueWarni
self._init_dates(dates, freq)

1 from statsmodels.tsa.stattools import kpss

2 kpss(arima_results.resid)

<ipython-input-32-5ae90626ffc6>:2: InterpolationWarning: The test statistic is outside of

look-up table. The actual p-value is greater than the p-value returned.

kpss(arima_results.resid)
(0.10495312679330766,
0.1,
10,
{'10%': 0.347, '5%': 0.463, '2.5%': 0.574, '1%': 0.739})

keyboard_arrow_down NARNN MODEL

1 from tensorflow import keras

2 from keras.models import Sequential
3 from keras.layers import LSTM, Dense
4 from keras.optimizers import Adam
5 from sklearn.preprocessing import MinMaxScaler

1 # Extract residuals from the ARIMA model

2 residuals = arima_results.resid
3
4 # Scale the residuals between 0 and 1
5 #scaler = MinMaxScaler(feature_range=(0, 1))
6 residuals_scaled = residuals.values.reshape(-1, 1) #scaler.fit_transform(residuals.values.reshape(-1, 1))
7
8 # Create a NARNN model
9 model = Sequential()
10 model.add(LSTM(units=100, activation='relu', return_sequences=True, input_shape=(residuals_scaled.shape[1
11 model.add(LSTM(units=100, activation='relu'))
12 model.add(Dense(units=1))
13
14 # Compile the model
15 model.compile(optimizer=Adam(learning_rate=0.001), loss='mean_squared_error')
16
17 # Train the model
18 model.fit(residuals_scaled, residuals_scaled, epochs=100, batch_size=32)

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1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.ipynb - Colaboratory
Epoch 74/100
2/2 [==============================] - 0s 10ms/step - loss: 0.0034
Epoch 75/100
2/2 [==============================] - 0s 8ms/step - loss: 0.0034
Epoch 76/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0033
Epoch 77/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0033
Epoch 78/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0032
Epoch 79/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0031
Epoch 80/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0031
Epoch 81/100
2/2 [==============================] - 0s 10ms/step - loss: 0.0030
Epoch 82/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0030
Epoch 83/100
2/2 [==============================] - 0s 11ms/step - loss: 0.0029
Epoch 84/100
2/2 [==============================] - 0s 10ms/step - loss: 0.0029
Epoch 85/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0028
Epoch 86/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0028
Epoch 87/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0027
Epoch 88/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0027
Epoch 89/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0026
Epoch 90/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0026
Epoch 91/100
2/2 [==============================] - 0s 10ms/step - loss: 0.0026
Epoch 92/100
2/2 [==============================] - 0s 11ms/step - loss: 0.0025
Epoch 93/100
2/2 [==============================] - 0s 13ms/step - loss: 0.0025
Epoch 94/100
2/2 [==============================] - 0s 11ms/step - loss: 0.0024
Epoch 95/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0024
Epoch 96/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0024
Epoch 97/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0023
Epoch 98/100
2/2 [==============================] - 0s 12ms/step - loss: 0.0023
Epoch 99/100
2/2 [==============================] - 0s 11ms/step - loss: 0.0022
Epoch 100/100
2/2 [==============================] - 0s 9ms/step - loss: 0.0022
<keras.src.callbacks.History at 0x7adb4f36d6c0>

1 # Evaluate the model

2 model.evaluate(residuals_scaled, residuals_scaled)

2/2 [==============================] - 0s 11ms/step - loss: 0.0022

0.0021930031944066286

1 # M k di ti
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1 # Make predictions
2 predictions = model.predict(residuals_scaled)
3
4 # Rescale the predictions back to the original range
5 #predictions = scaler.inverse_transform(predictions)
6
7 df2 = df
8 df2['Predictions'] = predictions
9 #df2 = pd.DataFrame({'Predictions': predictions.flatten()})
10 # Plot the actual and predicted residuals
11 plt.figure(figsize=(12, 6))
12 plt.plot(residuals, label='Actual Residuals (ARIMA)')
13 plt.plot(df2['Predictions'], label='Predicted Residuals (NARNN)')
14 plt.title('Actual vs Predicted Residuals')
15 plt.xlabel('Time')
16 plt.ylabel('Residuals')
17 plt.legend()
18 plt.show()

2/2 [==============================] - 0s 7ms/step

1 from sklearn.metrics import mean_squared_error, mean_absolute_error, r2_score, mean_absolute_percentage_e

2 # Calculate MSE
3 mse = mean_squared_error(residuals, df2['Predictions'])
4 print(f'MSE: {mse}')
5
6 # Calculate MAE
7 mae = mean_absolute_error(residuals, df2['Predictions'])
8 print(f'MAE: {mae}')
9
10 # Calculate MAPE
11 mape = mean_absolute_percentage_error(residuals, df2['Predictions'])
12 print(f'MAPE: {mape}')
13
14 # Calculate R2
15 r2 = r2_score(residuals, df2['Predictions'])
16 print(f'R2: {r2}')
17

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1/3/24, 7:22 PM PPP Models - ARIMA & NARNN.ipynb - Colaboratory

MSE: 0.0021930036840889827
MAE: 0.021088656323592293
MAPE: 0.07120554192303562
R2: 0.9978264000278362

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