Bucketing a numeric variable into a factor

Your old friend Dan sent you a list of 50 AAA rated bonds called AAA_rank, with each bond having an additional number from 1-100 describing how profitable he thinks that bond will be (100 being the most profitable). You are interested in doing further analysis on his suggestions, but first it would be nice if the bonds were bucketed by their ranking somehow. This would help you create groups of bonds, from least profitable to most profitable, to more easily analyze them.

This is a great example of creating a factor from a numeric vector. The easiest way to do this is to use cut(). Below, Dan's 1-100 ranking is bucketed into 5 evenly spaced groups. Note that the ( in the factor levels means we do not include the number beside it in that group, and the ] means that we do include that number in the group.

head(AAA_rank)

[1]  31  48 100  53  85  73

AAA_factor <- cut(x = AAA_rank, breaks = c(0, 20, 40, 60, 80, 100))

head(AAA_factor)

[1] (20,40]  (40,60]  (80,100] (40,60]  (80,100] (60,80] 
Levels: (0,20] (20,40] (40,60] (60,80] (80,100]

In the cut() function, using breaks = allows you to specify the groups that you want R to bucket your data by!