This is correct as well. You must however notice that there is not island of isolation here
Reference -> Short
After setting the reference to null there is not way to reach the Short. So the JVM GCs it. In case of the island however the JVM thinks the objects can be reached since they point to each other in a circle. The JVM does not figure that these objects dont have an external reference through which they can be reached, even though they can reach each other through their internal references.
Does that make it clear ? Or have I managed to confuse you more