I'm trying to do a regression with arima errors in R, with xreg in auto.arima following https://otexts.com/fpp2/ by https://robjhyndman.com/ but I have some questions about the predictors' choice in xreg in auto.arima.
1) What should be done if the predictors x1,x2,x3 are higly correlated in xreg=cbind(x1,x2,x3)?
Is there a problem if the columns of matrix are highly correlated like in linear regression?
2) If 1) is yes, is there any automatic procedure to select no-multicollinearity predictors in auto.arima? Or auto.arima already do this when you launch it? Or i have to study multicollinearity of columns of matrix previously?
3) For forecasting, i have read that it doesn't matter if the predictors in auto.arima() are not significant. Is it right?
Thank you for the help.