Home Depot Inc. (NYSE:HD)

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 Home Depot Inc. common stock.

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

Rates of Return

Home Depot Inc., monthly rates of return

		Home Depot Inc. (HD)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_HD,t¹	Dividend_HD,t¹	R_HD,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Feb 29, 2020	$217.84			2,954.22
1.	Mar 31, 2020	$186.71	$1.50	-13.60%	2,584.59	-12.51%
2.	Apr 30, 2020	$219.83		17.74%	2,912.43	12.68%
3.	May 31, 2020	$248.48		13.03%	3,044.31	4.53%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Dec 31, 2025	$344.10	$2.30	-2.95%	6,845.50	-0.05%
71.	Jan 31, 2026	$374.59		8.86%	6,939.03	1.37%
Average (R):				1.23%		1.33%
Standard deviation:				7.22%		4.83%

		Home Depot Inc. (HD)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_HD,t¹	Dividend_HD,t¹	R_HD,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Feb 29, 2020	$217.84			2,954.22
1.	Mar 31, 2020	$186.71	$1.50	-13.60%	2,584.59	-12.51%
2.	Apr 30, 2020	$219.83		17.74%	2,912.43	12.68%
3.	May 31, 2020	$248.48		13.03%	3,044.31	4.53%
4.	Jun 30, 2020	$250.51	$1.50	1.42%	3,100.29	1.84%
5.	Jul 31, 2020	$265.49		5.98%	3,271.12	5.51%
6.	Aug 31, 2020	$285.04		7.36%	3,500.31	7.01%
7.	Sep 30, 2020	$277.71	$1.50	-2.05%	3,363.00	-3.92%
8.	Oct 31, 2020	$266.71		-3.96%	3,269.96	-2.77%
9.	Nov 30, 2020	$277.41		4.01%	3,621.63	10.75%
10.	Dec 31, 2020	$265.62	$1.50	-3.71%	3,756.07	3.71%
11.	Jan 31, 2021	$270.82		1.96%	3,714.24	-1.11%
12.	Feb 28, 2021	$258.34		-4.61%	3,811.15	2.61%
13.	Mar 31, 2021	$305.25	$1.65	18.80%	3,972.89	4.24%
14.	Apr 30, 2021	$323.67		6.03%	4,181.17	5.24%
15.	May 31, 2021	$318.91		-1.47%	4,204.11	0.55%
16.	Jun 30, 2021	$318.89	$1.65	0.51%	4,297.50	2.22%
17.	Jul 31, 2021	$328.19		2.92%	4,395.26	2.27%
18.	Aug 31, 2021	$326.18		-0.61%	4,522.68	2.90%
19.	Sep 30, 2021	$328.26	$1.65	1.14%	4,307.54	-4.76%
20.	Oct 31, 2021	$371.74		13.25%	4,605.38	6.91%
21.	Nov 30, 2021	$400.61		7.77%	4,567.00	-0.83%
22.	Dec 31, 2021	$415.01	$1.65	4.01%	4,766.18	4.36%
23.	Jan 31, 2022	$366.98		-11.57%	4,515.55	-5.26%
24.	Feb 28, 2022	$315.83		-13.94%	4,373.94	-3.14%
25.	Mar 31, 2022	$299.33	$1.90	-4.62%	4,530.41	3.58%
26.	Apr 30, 2022	$300.40		0.36%	4,131.93	-8.80%
27.	May 31, 2022	$302.75		0.78%	4,132.15	0.01%
28.	Jun 30, 2022	$274.27	$1.90	-8.78%	3,785.38	-8.39%
29.	Jul 31, 2022	$300.94		9.72%	4,130.29	9.11%
30.	Aug 31, 2022	$288.42	$1.90	-3.53%	3,955.00	-4.24%
31.	Sep 30, 2022	$275.94		-4.33%	3,585.62	-9.34%
32.	Oct 31, 2022	$296.13		7.32%	3,871.98	7.99%
33.	Nov 30, 2022	$323.99	$1.90	10.05%	4,080.11	5.38%
34.	Dec 31, 2022	$315.86		-2.51%	3,839.50	-5.90%
35.	Jan 31, 2023	$324.17		2.63%	4,076.60	6.18%
36.	Feb 28, 2023	$296.54		-8.52%	3,970.15	-2.61%
37.	Mar 31, 2023	$295.12	$2.09	0.23%	4,109.31	3.51%
38.	Apr 30, 2023	$300.54		1.84%	4,169.48	1.46%
39.	May 31, 2023	$283.45	$2.09	-4.99%	4,179.83	0.25%
40.	Jun 30, 2023	$310.64		9.59%	4,376.86	4.71%
41.	Jul 31, 2023	$333.84		7.47%	4,588.96	4.85%
42.	Aug 31, 2023	$330.30	$2.09	-0.43%	4,507.66	-1.77%
43.	Sep 30, 2023	$302.16		-8.52%	4,288.05	-4.87%
44.	Oct 31, 2023	$284.69		-5.78%	4,193.80	-2.20%
45.	Nov 30, 2023	$313.49	$2.09	10.85%	4,567.80	8.92%
46.	Dec 31, 2023	$346.55		10.55%	4,769.83	4.42%
47.	Jan 31, 2024	$352.96		1.85%	4,845.65	1.59%
48.	Feb 29, 2024	$380.61		7.83%	5,096.27	5.17%
49.	Mar 31, 2024	$383.60	$2.25	1.38%	5,254.35	3.10%
50.	Apr 30, 2024	$334.22		-12.87%	5,035.69	-4.16%
51.	May 31, 2024	$334.87	$2.25	0.87%	5,277.51	4.80%
52.	Jun 30, 2024	$344.24		2.80%	5,460.48	3.47%
53.	Jul 31, 2024	$368.16		6.95%	5,522.30	1.13%
54.	Aug 31, 2024	$368.50	$2.25	0.70%	5,648.40	2.28%
55.	Sep 30, 2024	$405.20		9.96%	5,762.48	2.02%
56.	Oct 31, 2024	$393.75		-2.83%	5,705.45	-0.99%
57.	Nov 30, 2024	$429.13	$2.25	9.56%	6,032.38	5.73%
58.	Dec 31, 2024	$388.99		-9.35%	5,881.63	-2.50%
59.	Jan 31, 2025	$411.98		5.91%	6,040.53	2.70%
60.	Feb 28, 2025	$396.60		-3.73%	5,954.50	-1.42%
61.	Mar 31, 2025	$366.49	$2.30	-7.01%	5,611.85	-5.75%
62.	Apr 30, 2025	$360.49		-1.64%	5,569.06	-0.76%
63.	May 31, 2025	$368.29		2.16%	5,911.69	6.15%
64.	Jun 30, 2025	$366.64	$2.30	0.18%	6,204.95	4.96%
65.	Jul 31, 2025	$367.51		0.24%	6,339.39	2.17%
66.	Aug 31, 2025	$406.77		10.68%	6,460.26	1.91%
67.	Sep 30, 2025	$405.19	$2.30	0.18%	6,688.46	3.53%
68.	Oct 31, 2025	$379.59		-6.32%	6,840.20	2.27%
69.	Nov 30, 2025	$356.92		-5.97%	6,849.09	0.13%
70.	Dec 31, 2025	$344.10	$2.30	-2.95%	6,845.50	-0.05%
71.	Jan 31, 2026	$374.59		8.86%	6,939.03	1.37%
Average (R):				1.23%		1.33%
Standard deviation:				7.22%		4.83%

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 HD during period t

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

Variance and Covariance

Home Depot Inc., calculation of variance and covariance of returns

t	Date	R_HD,t	R_{S&P 500,t}	(R_HD,t–R_HD)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_HD,t–R_HD)×(R_{S&P 500,t}–R_{S&P 500})
1.	Mar 31, 2020	-13.60%	-12.51%	219.93	191.48	205.21
2.	Apr 30, 2020	17.74%	12.68%	272.60	129.02	187.54
3.	May 31, 2020	13.03%	4.53%	139.35	10.26	37.81
.	.	.	.	.	.	.
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.	.	.	.	.	.	.
70.	Dec 31, 2025	-2.95%	-0.05%	17.44	1.90	5.75
71.	Jan 31, 2026	8.86%	1.37%	58.26	0.00	0.31
Total (Σ):				3,646.36	1,636.00	1,745.44

t	Date	R_HD,t	R_{S&P 500,t}	(R_HD,t–R_HD)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_HD,t–R_HD)×(R_{S&P 500,t}–R_{S&P 500})
1.	Mar 31, 2020	-13.60%	-12.51%	219.93	191.48	205.21
2.	Apr 30, 2020	17.74%	12.68%	272.60	129.02	187.54
3.	May 31, 2020	13.03%	4.53%	139.35	10.26	37.81
4.	Jun 30, 2020	1.42%	1.84%	0.04	0.26	0.10
5.	Jul 31, 2020	5.98%	5.51%	22.58	17.51	19.88
6.	Aug 31, 2020	7.36%	7.01%	37.65	32.27	34.86
7.	Sep 30, 2020	-2.05%	-3.92%	10.72	27.55	17.18
8.	Oct 31, 2020	-3.96%	-2.77%	26.93	16.75	21.23
9.	Nov 30, 2020	4.01%	10.75%	7.75	88.91	26.25
10.	Dec 31, 2020	-3.71%	3.71%	24.38	5.70	-11.78
11.	Jan 31, 2021	1.96%	-1.11%	0.53	5.95	-1.78
12.	Feb 28, 2021	-4.61%	2.61%	34.06	1.65	-7.49
13.	Mar 31, 2021	18.80%	4.24%	308.66	8.52	51.27
14.	Apr 30, 2021	6.03%	5.24%	23.10	15.34	18.83
15.	May 31, 2021	-1.47%	0.55%	7.28	0.60	2.10
16.	Jun 30, 2021	0.51%	2.22%	0.51	0.80	-0.64
17.	Jul 31, 2021	2.92%	2.27%	2.85	0.90	1.60
18.	Aug 31, 2021	-0.61%	2.90%	3.39	2.48	-2.90
19.	Sep 30, 2021	1.14%	-4.76%	0.01	37.00	0.51
20.	Oct 31, 2021	13.25%	6.91%	144.42	31.23	67.16
21.	Nov 30, 2021	7.77%	-0.83%	42.75	4.66	-14.12
22.	Dec 31, 2021	4.01%	4.36%	7.72	9.22	8.43
23.	Jan 31, 2022	-11.57%	-5.26%	163.88	43.35	84.29
24.	Feb 28, 2022	-13.94%	-3.14%	230.01	19.91	67.67
25.	Mar 31, 2022	-4.62%	3.58%	34.23	5.07	-13.17
26.	Apr 30, 2022	0.36%	-8.80%	0.76	102.44	8.81
27.	May 31, 2022	0.78%	0.01%	0.20	1.74	0.59
28.	Jun 30, 2022	-8.78%	-8.39%	100.15	94.43	97.25
29.	Jul 31, 2022	9.72%	9.11%	72.18	60.62	66.15
30.	Aug 31, 2022	-3.53%	-4.24%	22.63	31.02	26.50
31.	Sep 30, 2022	-4.33%	-9.34%	30.86	113.75	59.25
32.	Oct 31, 2022	7.32%	7.99%	37.07	44.37	40.55
33.	Nov 30, 2022	10.05%	5.38%	77.82	16.40	35.72
34.	Dec 31, 2022	-2.51%	-5.90%	13.97	52.17	26.99
35.	Jan 31, 2023	2.63%	6.18%	1.97	23.52	6.80
36.	Feb 28, 2023	-8.52%	-2.61%	95.09	15.50	38.39
37.	Mar 31, 2023	0.23%	3.51%	1.00	4.75	-2.18
38.	Apr 30, 2023	1.84%	1.46%	0.37	0.02	0.08
39.	May 31, 2023	-4.99%	0.25%	38.68	1.16	6.70
40.	Jun 30, 2023	9.59%	4.71%	69.96	11.48	28.34
41.	Jul 31, 2023	7.47%	4.85%	38.94	12.39	21.97
42.	Aug 31, 2023	-0.43%	-1.77%	2.76	9.59	5.15
43.	Sep 30, 2023	-8.52%	-4.87%	95.02	38.41	60.41
44.	Oct 31, 2023	-5.78%	-2.20%	49.14	12.42	24.70
45.	Nov 30, 2023	10.85%	8.92%	92.59	57.64	73.06
46.	Dec 31, 2023	10.55%	4.42%	86.82	9.59	28.86
47.	Jan 31, 2024	1.85%	1.59%	0.39	0.07	0.16
48.	Feb 29, 2024	7.83%	5.17%	43.63	14.80	25.41
49.	Mar 31, 2024	1.38%	3.10%	0.02	3.16	0.26
50.	Apr 30, 2024	-12.87%	-4.16%	198.84	30.11	77.37
51.	May 31, 2024	0.87%	4.80%	0.13	12.09	-1.25
52.	Jun 30, 2024	2.80%	3.47%	2.46	4.59	3.36
53.	Jul 31, 2024	6.95%	1.13%	32.72	0.04	-1.11
54.	Aug 31, 2024	0.70%	2.28%	0.28	0.92	-0.50
55.	Sep 30, 2024	9.96%	2.02%	76.23	0.48	6.06
56.	Oct 31, 2024	-2.83%	-0.99%	16.43	5.36	9.39
57.	Nov 30, 2024	9.56%	5.73%	69.37	19.40	36.68
58.	Dec 31, 2024	-9.35%	-2.50%	111.98	14.63	40.47
59.	Jan 31, 2025	5.91%	2.70%	21.92	1.89	6.44
60.	Feb 28, 2025	-3.73%	-1.42%	24.61	7.56	13.64
61.	Mar 31, 2025	-7.01%	-5.75%	67.90	50.13	58.34
62.	Apr 30, 2025	-1.64%	-0.76%	8.21	4.36	5.98
63.	May 31, 2025	2.16%	6.15%	0.88	23.30	4.52
64.	Jun 30, 2025	0.18%	4.96%	1.11	13.21	-3.82
65.	Jul 31, 2025	0.24%	2.17%	0.98	0.71	-0.83
66.	Aug 31, 2025	10.68%	1.91%	89.39	0.34	5.49
67.	Sep 30, 2025	0.18%	3.53%	1.10	4.87	-2.32
68.	Oct 31, 2025	-6.32%	2.27%	56.94	0.89	-7.12
69.	Nov 30, 2025	-5.97%	0.13%	51.85	1.43	8.61
70.	Dec 31, 2025	-2.95%	-0.05%	17.44	1.90	5.75
71.	Jan 31, 2026	8.86%	1.37%	58.26	0.00	0.31
Total (Σ):				3,646.36	1,636.00	1,745.44

Show all

Variance_HD = Σ(R_HD,t–R_HD)² ÷ (71 – 1)
= 3,646.36 ÷ (71 – 1)
= 52.09

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,636.00 ÷ (71 – 1)
= 23.37

Covariance_{HD, S&P 500} = Σ(R_HD,t–R_HD)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 1,745.44 ÷ (71 – 1)
= 24.93

Systematic Risk (β) Estimation

Variance_HD	52.09
Variance_{S&P 500}	23.37
Covariance_{HD, S&P 500}	24.93
Correlation coefficient_{HD, S&P 500}¹	0.71
β_HD²	1.07
α_HD³	-0.19%

Calculations

¹ Correlation coefficient_{HD, S&P 500}
= Covariance_{HD, S&P 500} ÷ (Standard deviation_HD × Standard deviation_{S&P 500})
= 24.93 ÷ (7.22% × 4.83%)
= 0.71

² β_HD
= Covariance_{HD, S&P 500} ÷ Variance_{S&P 500}
= 24.93 ÷ 23.37
= 1.07

³ α_HD
= Average_HD – β_HD × Average_{S&P 500}
= 1.23% – 1.07 × 1.33%
= -0.19%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.54%
Expected rate of return on market portfolio²	E(R_M)	17.37%
Systematic risk (β) of Home Depot Inc. common stock	β_HD	1.07

Expected rate of return on Home Depot Inc. common stock³	E(R_HD)	18.22%

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_HD) = R_F + β_HD [E(R_M) – R_F]
= 4.54% + 1.07 [17.37% – 4.54%]
= 18.22%