Large residuals can come from two sources: either that data we are trying to fit a curve to is noisy or we are fitting a type of curve that is a bad match for data. If nearby residuals are highly correlated with each other, it means that we have large spans where we are under‐ or over‐estimating the function, suggesting that we've chosen a bad curve to fit. Uncorrelated residuals suggest that the data is simply noisy.
