I am using an automated variable selection technique to find covariates in a regression model. Notwithstanding the issues with automated variable selection, the procedure has returned two categorical covariates, RACE and LOCATION. RACE has five categories (1,2,3,4,5), and LOCATION has two (A and B). Part of the issue is that in location A, most of the RACE observations fall into a specific category, so it seems including both covariates is redundant...?
What is a typical procedure to deal with this? Would I want to combine categories somehow?