This is a table about possible rates of return on Stock A and B:

State of the economy	Probability	Stock A	Stock B
Deep recession	0.05	-20%	-30%
Mild recession	0.25	10%	5%
Average	0.35	15%	20%
Mild boom	0.20	20%	25%
Strong boom	0.15	25%	30%

The following data have been calculated:

SD(A) = 9.34%, SD(B) = 13.68%, Covariance between Stock A & B = 124.38%, Correlation between Stock A & B = 0.9735

(a) Would it be advisable to form a portfolio of both Stock A and B to diversify risk? Explain reasons in words.

(b) Short-selling either stock is allowed (ie. weights need not be all positive), find the minimun variance one can get by forming a portfolio of Stock A and B.