Binary coding, ranking transformation, and discretization

In our analytics journey, there will be many instances in which we want to transform our data from numerical representation to categorical representation, or vice versa. To do these transformations, we will have to use one of three tools: binary coding, ranking transformation, and discretization.

As the following figure shows, to switch from Categories to Numbers, we either have to use Binary Coding or Ranking Transformation, and to switch from numbers to categories, we need to use Discretization:

Figure 14.3 – Direction of application for binary coding, ranking transformation, and discretization

One question that the preceding figure might bring to mind is, how do we know which one we choose when we want to move from categories to numbers: binary coding or ranking transformation? The answer is simple.

If the categories are nominal, we can only use binary coding; if they are ordinal, both...