Clustering tries to find structure in data by creating groupings of data with similar characteristics. The most famous clustering algorithm is likely K-means, but there are a large number of ways to cluster observations. Hierarchical clustering is an alternative class of clustering algorithms that produce 1 to n clusters, where n is the number of observations in the data set. As you go down the hierarchy from 1 cluster (contains all the data) to n clusters (each observation is its own cluster), the clusters become more and more similar (almost always). There are two types of hierarchical clustering: divisive (top-down) and agglomerative (bottom-up).