Overview of this book

Starting with the basics, Applied Unsupervised Learning with R explains clustering methods, distribution analysis, data encoders, and features of R that enable you to understand your data better and get answers to your most pressing business questions. This book begins with the most important and commonly used method for unsupervised learning - clustering - and explains the three main clustering algorithms - k-means, divisive, and agglomerative. Following this, you'll study market basket analysis, kernel density estimation, principal component analysis, and anomaly detection. You'll be introduced to these methods using code written in R, with further instructions on how to work with, edit, and improve R code. To help you gain a practical understanding, the book also features useful tips on applying these methods to real business problems, including market segmentation and fraud detection. By working through interesting activities, you'll explore data encoders and latent variable models. By the end of this book, you will have a better understanding of different anomaly detection methods, such as outlier detection, Mahalanobis distances, and contextual and collective anomaly detection.
Applied Unsupervised Learning with R
Preface
Free Chapter
Introduction to Clustering Methods
Probability Distributions
Dimension Reduction
Data Comparison Methods
Anomaly Detection

Market basket analysis is a method that allows us to take high-dimensional data and reduce it to something that is simple and manageable without losing too much information along the way. In market basket analysis, our goal is to generate rules that govern the data.

Market basket analysis is also called affinity analysis. It is named after the example of a grocery store trying to do analysis on its customers' transactions – analysis of the products each customer puts in his or her basket. A large grocery store may have something like 5,000 items for sale at any given time. They may have thousands of customers per day. For each customer, the grocery store can keep a record of those customers' transactions. One way to do this would be to use binary encodings, as shown in the following example:

Customer 1's transactions on Day 1:

Peanut Butter: No

Jelly: Yes

Milk: No

Customer 2's transactions on Day 1:

Peanut Butter: Yes

Jelly: Yes