The Benefits of Diversification (40 points) You have been hired as a portfolio analyst for a wealth management company. One of your clients is asking about the benefits to diversification, and although she already has a well-diversified portfolio, she is considering adding some/all of the following assets which have state-specific returns according to the table: Question X.1: (15 points) Show that the second asset is redundant. That is, show that we can create the return profile of Risky Asset 2 by combining the other two risky assets. Question X.1: (25 points) In light of your answer to part 1 above, what assets would you recommend the client add to her portfolio, and why? Your answer should be in terms of covariance. Specifically, calculate and/or describe the covariance of each asset with the existing portfolio and the other assets and use that information to justify including or excluding the asset from the client's portfolio