The following table provides forecasted data pertaining to investments in A (domestic stock portfolio) and B (foreign stock portfolio, returns calculated in domestic currency).

Scenario Probability Return A (Domestic) Return B (foreign)

1 30% 10% 15%

2 30% 30% 10%

3 40% -5% 0%

A. Calculate standard deviations of A and B as well as the correlation between A and B.

B. Comment on the diversification potentional between A and B.