  Portfolio optimization has been an area of research that has attracted a lot
of attention from researchers and financial analysts. Designing an optimum
portfolio is a complex task since it not only involves accurate forecasting of
future stock returns and risks but also needs to optimize them. This paper
presents a systematic approach to portfolio optimization using two approaches,
the hierarchical risk parity algorithm and the Eigen portfolio on seven sectors
of the Indian stock market. The portfolios are built following the two
approaches to historical stock prices from Jan 1, 2016, to Dec 31, 2020. The
portfolio performances are evaluated on the test data from Jan 1, 2021, to Nov
1, 2021. The backtesting results of the portfolios indicate that the
performance of the HRP portfolio is superior to that of its Eigen counterpart
on both training and test data for the majority of the sectors studied.
