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I would like to plot two time-series on a same graph. One series takes much larger values than the other, so I thought a semilog scale might be appropriate (i.e. linear X (dates) and log Y). However, both series take on negative and positive values. Does it still make sense to use a log scale? If so, should I transform both series as follows?

    if observation > 0
        log_observation = log(observation)
    elseif observation < 0
        log_observation = -log(-observation)
    else
        log_observation = 0
lodhb
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    Because whether and how to transform data [depends on their characteristics (more than their signs!) and on the purpose of the transformation](http://stats.stackexchange.com/questions/298), please give us more information about both so that this can be an objectively answerable question. – whuber Nov 24 '12 at 17:03
  • The time-series are the returns in dollar vs. percent terms of a trading strategy over time. – lodhb Nov 25 '12 at 10:58
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    Why don't you show them as-is, using two different vertical axes to put the two series on the same graph? – whuber Nov 25 '12 at 16:31
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    So linear with two different y-axes? That is a good suggestion, I'll try it out. The only downside is that you don't have a single axis to compare both time-series on, but at least the graph will show correlation quite well. – lodhb Nov 25 '12 at 21:46

1 Answers1

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you might want to use a different transformation. The inverse hyerperbolic sine transform would seem to be a good first choice here.

user603
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