When I select assets for a portfolio given an universe, I tend to pick ones that span the beta spectrum, given your selected benchmark. I find that if your portfolio of assets have varying volatility or correlation, you can achieve better diversification. I didn't come up with the idea but it comes from a rotational system's framework from the link below:
http://cssanalytics.wordpress.com/2010/02/26/rotation-part-3-beta-surfing/
One thing to be careful is to avoid randomly throwing assets in to a optimization procedure as you may find the ending portfolio allocation concentrated with risk that is hidden from a portfolio level. It may be useful to first manually separate the etfs in to their respective categories.
HTH,