This research presents a novel hybrid portfolio optimization framework that combines the Hierarchical Risk Parity (HRP) algorithm with two Multi-Criteria Decision-Making (MCDM) methods, MEREC and WEDBA, specifically to overcome fundamental shortcomings in the standard HRP model. The central goal is to alleviate the chaining problem and resolve HRP’s difficulty in identifying the optimal number of clusters, issues known to negatively affect portfolio diversification and risk allocation. To achieve this structural improvement, the Elbow method is integrated directly into the HRP process, ensuring a robust cluster structure is defined before any weight allocation occurs. The MEREC method is then utilized to calculate objective criterion weights, while the WEDBA approach is employed to assess the financial performance of individual assets within each cluster generated by HRP. This HRP–MCDM algorithm is tested using daily closing price data for stocks on the BIST 100 Index covering the 2018–2022 period. The performance of portfolios generated across seven distinct linkage methods (Ward, single, complete, average, weighted, centroid, and median) is rigorously benchmarked against the outcomes from the traditional HRP approach. Findings demonstrate that the HRP–MCDM framework significantly boosts both return levels and risk-adjusted metrics, especially when using the single and Ward linkage method, thereby surpassing the standard HRP algorithm in the majority of test cases. By strategically blending machine-learning-based risk clustering with objective, multi-criteria evaluation, this study makes a vital methodological contribution to the portfolio optimization domain, equipping investors with a more stable, transparent, and performance-focused asset allocation instrument.