Stock Analysis on Net
Stock Analysis on Net

Diamondback Energy Inc. (NASDAQ:FANG)

This company has been moved to the archive! The financial data has not been updated since November 8, 2022.

Capital Asset Pricing Model (CAPM)

Microsoft Excel

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Diamondback Energy Inc. common stock.

Rates of Return

Diamondback Energy Inc., monthly rates of return

Microsoft Excel
Diamondback Energy Inc. (FANG) Standard & Poor’s 500 (S&P 500)
t Date PriceFANG,t1 DividendFANG,t1 RFANG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $105.17 2,278.87
1. Feb 28, 2017 $100.86 -4.10% 2,363.64 3.72%
2. Mar 31, 2017 $103.72 2.84% 2,362.72 -0.04%
3. Apr 30, 2017 $99.84 -3.74% 2,384.20 0.91%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 $106.73 $0.50 0.04% 4,567.00 -0.83%
59. Dec 31, 2021 $107.85 1.05% 4,766.18 4.36%
Average (R): 1.64% 1.36%
Standard deviation: 17.17% 4.48%
Diamondback Energy Inc. (FANG) Standard & Poor’s 500 (S&P 500)
t Date PriceFANG,t1 DividendFANG,t1 RFANG,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $105.17 2,278.87
1. Feb 28, 2017 $100.86 -4.10% 2,363.64 3.72%
2. Mar 31, 2017 $103.72 2.84% 2,362.72 -0.04%
3. Apr 30, 2017 $99.84 -3.74% 2,384.20 0.91%
4. May 31, 2017 $92.76 -7.09% 2,411.80 1.16%
5. Jun 30, 2017 $88.81 -4.26% 2,423.41 0.48%
6. Jul 31, 2017 $95.88 7.96% 2,470.30 1.93%
7. Aug 31, 2017 $90.79 -5.31% 2,471.65 0.05%
8. Sep 30, 2017 $97.96 7.90% 2,519.36 1.93%
9. Oct 31, 2017 $107.16 9.39% 2,575.26 2.22%
10. Nov 30, 2017 $109.31 2.01% 2,647.58 2.81%
11. Dec 31, 2017 $126.25 15.50% 2,673.61 0.98%
12. Jan 31, 2018 $125.50 -0.59% 2,823.81 5.62%
13. Feb 28, 2018 $124.64 -0.69% 2,713.83 -3.89%
14. Mar 31, 2018 $126.52 1.51% 2,640.87 -2.69%
15. Apr 30, 2018 $128.45 1.53% 2,648.05 0.27%
16. May 31, 2018 $120.76 $0.125 -5.89% 2,705.27 2.16%
17. Jun 30, 2018 $131.57 8.95% 2,718.37 0.48%
18. Jul 31, 2018 $131.95 0.29% 2,816.29 3.60%
19. Aug 31, 2018 $121.08 $0.125 -8.14% 2,901.52 3.03%
20. Sep 30, 2018 $135.19 11.65% 2,913.98 0.43%
21. Oct 31, 2018 $112.36 -16.89% 2,711.74 -6.94%
22. Nov 30, 2018 $110.38 $0.125 -1.65% 2,760.17 1.79%
23. Dec 31, 2018 $92.70 -16.02% 2,506.85 -9.18%
24. Jan 31, 2019 $103.12 11.24% 2,704.10 7.87%
25. Feb 28, 2019 $102.93 $0.125 -0.06% 2,784.49 2.97%
26. Mar 31, 2019 $101.53 -1.36% 2,834.40 1.79%
27. Apr 30, 2019 $106.39 4.79% 2,945.83 3.93%
28. May 31, 2019 $98.06 $0.1875 -7.65% 2,752.06 -6.58%
29. Jun 30, 2019 $108.97 11.13% 2,941.76 6.89%
30. Jul 31, 2019 $103.43 -5.08% 2,980.38 1.31%
31. Aug 31, 2019 $98.08 $0.1875 -4.99% 2,926.46 -1.81%
32. Sep 30, 2019 $89.91 -8.33% 2,976.74 1.72%
33. Oct 31, 2019 $85.76 -4.62% 3,037.56 2.04%
34. Nov 30, 2019 $77.34 $0.1875 -9.60% 3,140.98 3.40%
35. Dec 31, 2019 $92.86 20.07% 3,230.78 2.86%
36. Jan 31, 2020 $74.40 -19.88% 3,225.52 -0.16%
37. Feb 29, 2020 $62.00 -16.67% 2,954.22 -8.41%
38. Mar 31, 2020 $26.20 $0.375 -57.14% 2,584.59 -12.51%
39. Apr 30, 2020 $43.54 66.18% 2,912.43 12.68%
40. May 31, 2020 $42.58 $0.375 -1.34% 3,044.31 4.53%
41. Jun 30, 2020 $41.82 -1.78% 3,100.29 1.84%
42. Jul 31, 2020 $39.86 -4.69% 3,271.12 5.51%
43. Aug 31, 2020 $38.96 $0.375 -1.32% 3,500.31 7.01%
44. Sep 30, 2020 $30.12 -22.69% 3,363.00 -3.92%
45. Oct 31, 2020 $25.96 -13.81% 3,269.96 -2.77%
46. Nov 30, 2020 $39.96 $0.375 55.37% 3,621.63 10.75%
47. Dec 31, 2020 $48.40 21.12% 3,756.07 3.71%
48. Jan 31, 2021 $56.69 17.13% 3,714.24 -1.11%
49. Feb 28, 2021 $69.28 22.21% 3,811.15 2.61%
50. Mar 31, 2021 $73.49 $0.40 6.65% 3,972.89 4.24%
51. Apr 30, 2021 $81.73 11.21% 4,181.17 5.24%
52. May 31, 2021 $80.07 $0.40 -1.54% 4,204.11 0.55%
53. Jun 30, 2021 $93.89 17.26% 4,297.50 2.22%
54. Jul 31, 2021 $77.13 -17.85% 4,395.26 2.27%
55. Aug 31, 2021 $77.14 $0.45 0.60% 4,522.68 2.90%
56. Sep 30, 2021 $94.67 22.72% 4,307.54 -4.76%
57. Oct 31, 2021 $107.19 13.22% 4,605.38 6.91%
58. Nov 30, 2021 $106.73 $0.50 0.04% 4,567.00 -0.83%
59. Dec 31, 2021 $107.85 1.05% 4,766.18 4.36%
Average (R): 1.64% 1.36%
Standard deviation: 17.17% 4.48%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of FANG during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t

Variance and Covariance

Diamondback Energy Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RFANG,t RS&P 500,t (RFANG,t–RFANG)2 (RS&P 500,t–RS&P 500)2 (RFANG,t–RFANG)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2017 -4.10% 3.72% 32.92 5.58 -13.55
2. Mar 31, 2017 2.84% -0.04% 1.43 1.95 -1.67
3. Apr 30, 2017 -3.74% 0.91% 28.95 0.20 2.41
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 0.04% -0.83% 2.57 4.80 3.51
59. Dec 31, 2021 1.05% 4.36% 0.35 9.02 -1.77
Total (Σ): 17,104.37 1,164.17 2,943.55
t Date RFANG,t RS&P 500,t (RFANG,t–RFANG)2 (RS&P 500,t–RS&P 500)2 (RFANG,t–RFANG)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2017 -4.10% 3.72% 32.92 5.58 -13.55
2. Mar 31, 2017 2.84% -0.04% 1.43 1.95 -1.67
3. Apr 30, 2017 -3.74% 0.91% 28.95 0.20 2.41
4. May 31, 2017 -7.09% 1.16% 76.23 0.04 1.75
5. Jun 30, 2017 -4.26% 0.48% 34.79 0.77 5.17
6. Jul 31, 2017 7.96% 1.93% 39.96 0.33 3.65
7. Aug 31, 2017 -5.31% 0.05% 48.28 1.70 9.06
8. Sep 30, 2017 7.90% 1.93% 39.16 0.33 3.58
9. Oct 31, 2017 9.39% 2.22% 60.09 0.74 6.67
10. Nov 30, 2017 2.01% 2.81% 0.13 2.10 0.53
11. Dec 31, 2017 15.50% 0.98% 192.03 0.14 -5.19
12. Jan 31, 2018 -0.59% 5.62% 4.99 18.15 -9.52
13. Feb 28, 2018 -0.69% -3.89% 5.41 27.59 12.21
14. Mar 31, 2018 1.51% -2.69% 0.02 16.37 0.53
15. Apr 30, 2018 1.53% 0.27% 0.01 1.18 0.12
16. May 31, 2018 -5.89% 2.16% 56.69 0.64 -6.05
17. Jun 30, 2018 8.95% 0.48% 53.47 0.76 -6.39
18. Jul 31, 2018 0.29% 3.60% 1.82 5.04 -3.03
19. Aug 31, 2018 -8.14% 3.03% 95.70 2.78 -16.32
20. Sep 30, 2018 11.65% 0.43% 100.28 0.86 -9.30
21. Oct 31, 2018 -16.89% -6.94% 343.25 68.86 153.74
22. Nov 30, 2018 -1.65% 1.79% 10.83 0.18 -1.41
23. Dec 31, 2018 -16.02% -9.18% 311.77 111.00 186.03
24. Jan 31, 2019 11.24% 7.87% 92.18 42.39 62.51
25. Feb 28, 2019 -0.06% 2.97% 2.90 2.61 -2.75
26. Mar 31, 2019 -1.36% 1.79% 9.00 0.19 -1.30
27. Apr 30, 2019 4.79% 3.93% 9.90 6.62 8.10
28. May 31, 2019 -7.65% -6.58% 86.36 62.97 73.75
29. Jun 30, 2019 11.13% 6.89% 89.99 30.64 52.51
30. Jul 31, 2019 -5.08% 1.31% 45.21 0.00 0.30
31. Aug 31, 2019 -4.99% -1.81% 43.97 10.03 21.00
32. Sep 30, 2019 -8.33% 1.72% 99.39 0.13 -3.59
33. Oct 31, 2019 -4.62% 2.04% 39.13 0.47 -4.29
34. Nov 30, 2019 -9.60% 3.40% 126.32 4.19 -23.00
35. Dec 31, 2019 20.07% 2.86% 339.58 2.25 27.66
36. Jan 31, 2020 -19.88% -0.16% 463.07 2.31 32.72
37. Feb 29, 2020 -16.67% -8.41% 335.12 95.43 178.83
38. Mar 31, 2020 -57.14% -12.51% 3,454.71 192.37 815.22
39. Apr 30, 2020 66.18% 12.68% 4,165.87 128.29 731.05
40. May 31, 2020 -1.34% 4.53% 8.90 10.05 -9.46
41. Jun 30, 2020 -1.78% 1.84% 11.73 0.23 -1.65
42. Jul 31, 2020 -4.69% 5.51% 40.02 17.24 -26.27
43. Aug 31, 2020 -1.32% 7.01% 8.74 31.91 -16.70
44. Sep 30, 2020 -22.69% -3.92% 591.93 27.89 128.48
45. Oct 31, 2020 -13.81% -2.77% 238.74 17.01 63.73
46. Nov 30, 2020 55.37% 10.75% 2,887.34 88.30 504.92
47. Dec 31, 2020 21.12% 3.71% 379.53 5.54 45.86
48. Jan 31, 2021 17.13% -1.11% 239.89 6.11 -38.28
49. Feb 28, 2021 22.21% 2.61% 423.08 1.57 25.74
50. Mar 31, 2021 6.65% 4.24% 25.15 8.33 14.47
51. Apr 30, 2021 11.21% 5.24% 91.64 15.09 37.19
52. May 31, 2021 -1.54% 0.55% 10.12 0.65 2.57
53. Jun 30, 2021 17.26% 2.22% 243.99 0.75 13.49
54. Jul 31, 2021 -17.85% 2.27% 379.87 0.84 -17.87
55. Aug 31, 2021 0.60% 2.90% 1.09 2.38 -1.61
56. Sep 30, 2021 22.72% -4.76% 444.59 37.39 -128.93
57. Oct 31, 2021 13.22% 6.91% 134.22 30.87 64.37
58. Nov 30, 2021 0.04% -0.83% 2.57 4.80 3.51
59. Dec 31, 2021 1.05% 4.36% 0.35 9.02 -1.77
Total (Σ): 17,104.37 1,164.17 2,943.55

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VarianceFANG = Σ(RFANG,t–RFANG)2 ÷ (59 – 1)
= 17,104.37 ÷ (59 – 1)
= 294.90

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (59 – 1)
= 1,164.17 ÷ (59 – 1)
= 20.07

CovarianceFANG, S&P 500 = Σ(RFANG,t–RFANG)×(RS&P 500,t–RS&P 500) ÷ (59 – 1)
= 2,943.55 ÷ (59 – 1)
= 50.75

Systematic Risk (β) Estimation

Microsoft Excel
VarianceFANG 294.90
VarianceS&P 500 20.07
CovarianceFANG, S&P 500 50.75
Correlation coefficientFANG, S&P 5001 0.66
βFANG2 2.53
αFANG3 -1.79%

Calculations

1 Correlation coefficientFANG, S&P 500
= CovarianceFANG, S&P 500 ÷ (Standard deviationFANG × Standard deviationS&P 500)
= 50.75 ÷ (17.17% × 4.48%)
= 0.66

2 βFANG
= CovarianceFANG, S&P 500 ÷ VarianceS&P 500
= 50.75 ÷ 20.07
= 2.53

3 αFANG
= AverageFANG – βFANG × AverageS&P 500
= 1.64% – 2.53 × 1.36%
= -1.79%

Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.81%
Expected rate of return on market portfolio2 E(RM) 13.55%
Systematic risk (β) of Diamondback Energy Inc. common stock βFANG 2.53
 
Expected rate of return on Diamondback Energy Inc. common stock3 E(RFANG) 26.90%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(RFANG) = RF + βFANG [E(RM) – RF]
= 4.81% + 2.53 [13.55% – 4.81%]
= 26.90%