Lumentum Holdings Inc. (NASDAQ:LITE)

Capital Asset Pricing Model (CAPM)

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

Rates of Return
Variance and Covariance
Systematic Risk (β) Estimation
Expected Rate of Return

Rates of Return

Lumentum Holdings Inc., monthly rates of return

		Lumentum Holdings Inc. (LITE)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_LITE,t¹	Dividend_LITE,t¹	R_LITE,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jul 31, 2020	$92.83			3,271.12
1.	Aug 31, 2020	$86.00		-7.36%	3,500.31	7.01%
2.	Sep 30, 2020	$75.13		-12.64%	3,363.00	-3.92%
3.	Oct 31, 2020	$82.69		10.06%	3,269.96	-2.77%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	May 31, 2026	$854.96		-5.25%	7,580.06	5.15%
71.	Jun 30, 2026	$858.06		0.36%	7,499.36	-1.06%
Average (R):				4.37%		1.28%
Standard deviation:				16.90%		4.53%

		Lumentum Holdings Inc. (LITE)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_LITE,t¹	Dividend_LITE,t¹	R_LITE,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Jul 31, 2020	$92.83			3,271.12
1.	Aug 31, 2020	$86.00		-7.36%	3,500.31	7.01%
2.	Sep 30, 2020	$75.13		-12.64%	3,363.00	-3.92%
3.	Oct 31, 2020	$82.69		10.06%	3,269.96	-2.77%
4.	Nov 30, 2020	$86.38		4.46%	3,621.63	10.75%
5.	Dec 31, 2020	$94.80		9.75%	3,756.07	3.71%
6.	Jan 31, 2021	$93.80		-1.05%	3,714.24	-1.11%
7.	Feb 28, 2021	$90.00		-4.05%	3,811.15	2.61%
8.	Mar 31, 2021	$91.35		1.50%	3,972.89	4.24%
9.	Apr 30, 2021	$85.05		-6.90%	4,181.17	5.24%
10.	May 31, 2021	$81.37		-4.33%	4,204.11	0.55%
11.	Jun 30, 2021	$82.03		0.81%	4,297.50	2.22%
12.	Jul 31, 2021	$83.99		2.39%	4,395.26	2.27%
13.	Aug 31, 2021	$86.64		3.16%	4,522.68	2.90%
14.	Sep 30, 2021	$83.54		-3.58%	4,307.54	-4.76%
15.	Oct 31, 2021	$82.58		-1.15%	4,605.38	6.91%
16.	Nov 30, 2021	$86.77		5.07%	4,567.00	-0.83%
17.	Dec 31, 2021	$105.77		21.90%	4,766.18	4.36%
18.	Jan 31, 2022	$101.48		-4.06%	4,515.55	-5.26%
19.	Feb 28, 2022	$98.86		-2.58%	4,373.94	-3.14%
20.	Mar 31, 2022	$97.60		-1.27%	4,530.41	3.58%
21.	Apr 30, 2022	$81.21		-16.79%	4,131.93	-8.80%
22.	May 31, 2022	$86.08		6.00%	4,132.15	0.01%
23.	Jun 30, 2022	$79.42		-7.74%	3,785.38	-8.39%
24.	Jul 31, 2022	$90.46		13.90%	4,130.29	9.11%
25.	Aug 31, 2022	$83.55		-7.64%	3,955.00	-4.24%
26.	Sep 30, 2022	$68.57		-17.93%	3,585.62	-9.34%
27.	Oct 31, 2022	$74.45		8.58%	3,871.98	7.99%
28.	Nov 30, 2022	$54.94		-26.21%	4,080.11	5.38%
29.	Dec 31, 2022	$52.17		-5.04%	3,839.50	-5.90%
30.	Jan 31, 2023	$60.18		15.35%	4,076.60	6.18%
31.	Feb 28, 2023	$53.81		-10.58%	3,970.15	-2.61%
32.	Mar 31, 2023	$54.01		0.37%	4,109.31	3.51%
33.	Apr 30, 2023	$48.25		-10.66%	4,169.48	1.46%
34.	May 31, 2023	$52.90		9.64%	4,179.83	0.25%
35.	Jun 30, 2023	$56.73		7.24%	4,376.86	4.71%
36.	Jul 31, 2023	$52.36		-7.70%	4,588.96	4.85%
37.	Aug 31, 2023	$54.13		3.38%	4,507.66	-1.77%
38.	Sep 30, 2023	$45.18		-16.53%	4,288.05	-4.87%
39.	Oct 31, 2023	$39.21		-13.21%	4,193.80	-2.20%
40.	Nov 30, 2023	$42.80		9.16%	4,567.80	8.92%
41.	Dec 31, 2023	$52.42		22.48%	4,769.83	4.42%
42.	Jan 31, 2024	$54.94		4.81%	4,845.65	1.59%
43.	Feb 29, 2024	$48.47		-11.78%	5,096.27	5.17%
44.	Mar 31, 2024	$47.35		-2.31%	5,254.35	3.10%
45.	Apr 30, 2024	$43.76		-7.58%	5,035.69	-4.16%
46.	May 31, 2024	$43.50		-0.59%	5,277.51	4.80%
47.	Jun 30, 2024	$50.92		17.06%	5,460.48	3.47%
48.	Jul 31, 2024	$51.78		1.69%	5,522.30	1.13%
49.	Aug 31, 2024	$57.61		11.26%	5,648.40	2.28%
50.	Sep 30, 2024	$63.38		10.02%	5,762.48	2.02%
51.	Oct 31, 2024	$63.87		0.77%	5,705.45	-0.99%
52.	Nov 30, 2024	$86.97		36.17%	6,032.38	5.73%
53.	Dec 31, 2024	$83.95		-3.47%	5,881.63	-2.50%
54.	Jan 31, 2025	$85.06		1.32%	6,040.53	2.70%
55.	Feb 28, 2025	$70.33		-17.32%	5,954.50	-1.42%
56.	Mar 31, 2025	$62.34		-11.36%	5,611.85	-5.75%
57.	Apr 30, 2025	$59.04		-5.29%	5,569.06	-0.76%
58.	May 31, 2025	$72.28		22.43%	5,911.69	6.15%
59.	Jun 30, 2025	$95.06		31.52%	6,204.95	4.96%
60.	Jul 31, 2025	$110.08		15.80%	6,339.39	2.17%
61.	Aug 31, 2025	$132.81		20.65%	6,460.26	1.91%
62.	Sep 30, 2025	$162.71		22.51%	6,688.46	3.53%
63.	Oct 31, 2025	$201.56		23.88%	6,840.20	2.27%
64.	Nov 30, 2025	$325.16		61.32%	6,849.09	0.13%
65.	Dec 31, 2025	$368.59		13.36%	6,845.50	-0.05%
66.	Jan 31, 2026	$391.84		6.31%	6,939.03	1.37%
67.	Feb 28, 2026	$700.91		78.88%	6,878.88	-0.87%
68.	Mar 31, 2026	$702.76		0.26%	6,528.52	-5.09%
69.	Apr 30, 2026	$902.32		28.40%	7,209.01	10.42%
70.	May 31, 2026	$854.96		-5.25%	7,580.06	5.15%
71.	Jun 30, 2026	$858.06		0.36%	7,499.36	-1.06%
Average (R):				4.37%		1.28%
Standard deviation:				16.90%		4.53%

Show all

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

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

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

Variance and Covariance

Lumentum Holdings Inc., calculation of variance and covariance of returns

t	Date	R_LITE,t	R_{S&P 500,t}	(R_LITE,t–R_LITE)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_LITE,t–R_LITE)×(R_{S&P 500,t}–R_{S&P 500})
1.	Aug 31, 2020	-7.36%	7.01%	137.44	32.84	-67.18
2.	Sep 30, 2020	-12.64%	-3.92%	289.18	27.03	88.41
3.	Oct 31, 2020	10.06%	-2.77%	32.45	16.34	-23.03
.	.	.	.	.	.	.
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70.	May 31, 2026	-5.25%	5.15%	92.44	14.98	-37.22
71.	Jun 30, 2026	0.36%	-1.06%	16.03	5.48	9.37
Total (Σ):				19,983.13	1,436.39	1,751.77

t	Date	R_LITE,t	R_{S&P 500,t}	(R_LITE,t–R_LITE)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_LITE,t–R_LITE)×(R_{S&P 500,t}–R_{S&P 500})
1.	Aug 31, 2020	-7.36%	7.01%	137.44	32.84	-67.18
2.	Sep 30, 2020	-12.64%	-3.92%	289.18	27.03	88.41
3.	Oct 31, 2020	10.06%	-2.77%	32.45	16.34	-23.03
4.	Nov 30, 2020	4.46%	10.75%	0.01	89.84	0.92
5.	Dec 31, 2020	9.75%	3.71%	28.96	5.93	13.11
6.	Jan 31, 2021	-1.05%	-1.11%	29.38	5.71	12.96
7.	Feb 28, 2021	-4.05%	2.61%	70.85	1.78	-11.22
8.	Mar 31, 2021	1.50%	4.24%	8.21	8.81	-8.50
9.	Apr 30, 2021	-6.90%	5.24%	126.84	15.73	-44.67
10.	May 31, 2021	-4.33%	0.55%	75.56	0.53	6.32
11.	Jun 30, 2021	0.81%	2.22%	12.64	0.89	-3.36
12.	Jul 31, 2021	2.39%	2.27%	3.91	1.00	-1.97
13.	Aug 31, 2021	3.16%	2.90%	1.47	2.63	-1.96
14.	Sep 30, 2021	-3.58%	-4.76%	63.11	36.40	47.93
15.	Oct 31, 2021	-1.15%	6.91%	30.42	31.79	-31.09
16.	Nov 30, 2021	5.07%	-0.83%	0.50	4.45	-1.49
17.	Dec 31, 2021	21.90%	4.36%	307.34	9.52	54.08
18.	Jan 31, 2022	-4.06%	-5.26%	70.93	42.70	55.03
19.	Feb 28, 2022	-2.58%	-3.14%	48.27	19.47	30.66
20.	Mar 31, 2022	-1.27%	3.58%	31.81	5.29	-12.98
21.	Apr 30, 2022	-16.79%	-8.80%	447.70	101.44	213.11
22.	May 31, 2022	6.00%	0.01%	2.66	1.62	-2.07
23.	Jun 30, 2022	-7.74%	-8.39%	146.48	93.48	117.01
24.	Jul 31, 2022	13.90%	9.11%	90.91	61.39	74.71
25.	Aug 31, 2022	-7.64%	-4.24%	144.11	30.47	66.27
26.	Sep 30, 2022	-17.93%	-9.34%	497.08	112.70	236.68
27.	Oct 31, 2022	8.58%	7.99%	17.72	45.03	28.24
28.	Nov 30, 2022	-26.21%	5.38%	934.61	16.80	-125.31
29.	Dec 31, 2022	-5.04%	-5.90%	88.51	51.46	67.49
30.	Jan 31, 2023	15.35%	6.18%	120.73	24.00	53.83
31.	Feb 28, 2023	-10.58%	-2.61%	223.53	15.11	58.12
32.	Mar 31, 2023	0.37%	3.51%	15.95	4.97	-8.90
33.	Apr 30, 2023	-10.66%	1.46%	225.92	0.04	-2.83
34.	May 31, 2023	9.64%	0.25%	27.79	1.06	-5.42
35.	Jun 30, 2023	7.24%	4.71%	8.26	11.82	9.88
36.	Jul 31, 2023	-7.70%	4.85%	145.66	12.74	-43.08
37.	Aug 31, 2023	3.38%	-1.77%	0.97	9.29	3.00
38.	Sep 30, 2023	-16.53%	-4.87%	436.82	37.80	128.50
39.	Oct 31, 2023	-13.21%	-2.20%	309.05	12.07	61.08
40.	Nov 30, 2023	9.16%	8.92%	22.94	58.40	36.60
41.	Dec 31, 2023	22.48%	4.42%	328.00	9.90	56.99
42.	Jan 31, 2024	4.81%	1.59%	0.19	0.10	0.14
43.	Feb 29, 2024	-11.78%	5.17%	260.58	15.18	-62.89
44.	Mar 31, 2024	-2.31%	3.10%	44.58	3.33	-12.19
45.	Apr 30, 2024	-7.58%	-4.16%	142.75	29.57	64.97
46.	May 31, 2024	-0.59%	4.80%	24.60	12.43	-17.49
47.	Jun 30, 2024	17.06%	3.47%	161.08	4.80	27.80
48.	Jul 31, 2024	1.69%	1.13%	7.17	0.02	0.39
49.	Aug 31, 2024	11.26%	2.28%	47.52	1.01	6.94
50.	Sep 30, 2024	10.02%	2.02%	31.92	0.55	4.20
51.	Oct 31, 2024	0.77%	-0.99%	12.91	5.13	8.14
52.	Nov 30, 2024	36.17%	5.73%	1,011.33	19.84	141.64
53.	Dec 31, 2024	-3.47%	-2.50%	61.44	14.25	29.59
54.	Jan 31, 2025	1.32%	2.70%	9.26	2.03	-4.34
55.	Feb 28, 2025	-17.32%	-1.42%	470.16	7.29	58.55
56.	Mar 31, 2025	-11.36%	-5.75%	247.33	49.43	110.57
57.	Apr 30, 2025	-5.29%	-0.76%	93.30	4.16	19.69
58.	May 31, 2025	22.43%	6.15%	326.15	23.78	88.06
59.	Jun 30, 2025	31.52%	4.96%	737.15	13.58	100.03
60.	Jul 31, 2025	15.80%	2.17%	130.75	0.79	10.18
61.	Aug 31, 2025	20.65%	1.91%	265.13	0.40	10.26
62.	Sep 30, 2025	22.51%	3.53%	329.33	5.09	40.94
63.	Oct 31, 2025	23.88%	2.27%	380.68	0.98	19.36
64.	Nov 30, 2025	61.32%	0.13%	3,243.96	1.31	-65.29
65.	Dec 31, 2025	13.36%	-0.05%	80.83	1.77	-11.95
66.	Jan 31, 2026	6.31%	1.37%	3.77	0.01	0.17
67.	Feb 28, 2026	78.88%	-0.87%	5,551.85	4.59	-159.68
68.	Mar 31, 2026	0.26%	-5.09%	16.83	40.57	26.13
69.	Apr 30, 2026	28.40%	10.42%	577.48	83.67	219.81
70.	May 31, 2026	-5.25%	5.15%	92.44	14.98	-37.22
71.	Jun 30, 2026	0.36%	-1.06%	16.03	5.48	9.37
Total (Σ):				19,983.13	1,436.39	1,751.77

Show all

Variance_LITE = Σ(R_LITE,t–R_LITE)² ÷ (71 – 1)
= 19,983.13 ÷ (71 – 1)
= 285.47

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,436.39 ÷ (71 – 1)
= 20.52

Covariance_{LITE, S&P 500} = Σ(R_LITE,t–R_LITE)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 1,751.77 ÷ (71 – 1)
= 25.03

Systematic Risk (β) Estimation

Variance_LITE	285.47
Variance_{S&P 500}	20.52
Covariance_{LITE, S&P 500}	25.03
Correlation coefficient_{LITE, S&P 500}¹	0.33
β_LITE²	1.22
α_LITE³	2.81%

Calculations

¹ Correlation coefficient_{LITE, S&P 500}
= Covariance_{LITE, S&P 500} ÷ (Standard deviation_LITE × Standard deviation_{S&P 500})
= 25.03 ÷ (16.90% × 4.53%)
= 0.33

² β_LITE
= Covariance_{LITE, S&P 500} ÷ Variance_{S&P 500}
= 25.03 ÷ 20.52
= 1.22

³ α_LITE
= Average_LITE – β_LITE × Average_{S&P 500}
= 4.37% – 1.22 × 1.28%
= 2.81%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	5.64%
Expected rate of return on market portfolio²	E(R_M)	17.45%
Systematic risk (β) of Lumentum Holdings Inc. common stock	β_LITE	1.22

Expected rate of return on Lumentum Holdings Inc. common stock³	E(R_LITE)	20.05%

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(R_LITE) = R_F + β_LITE [E(R_M) – R_F]
= 5.64% + 1.22 [17.45% – 5.64%]
= 20.05%