"Less than a week after Ackman's announcement on December 20th, we saw a sharp increase in traders covering their short positions, seemingly resulting in a squeeze," said Karl Loomes, market analyst at SunGard's Astec Analytics, a provider of data on securities lending.
Shares of Herbalife, which initially plunged 40 percent after Ackman's presentation, surged 76 percent during the height of that initial short squeeze, which took place approximately from Dec. 24 to Jan. 15.
During the period Herbalife shares were roaring back from $26.06 to $46.19, the cost of borrowing Herbalife shares from a broker surged from 1 percent to a peak of over 7 percent on an annualized basis, according to data from Astec Analytics.
Since the squeeze ended, the cost of borrowing Herbalife shares has fallen to around 2 percent annually.
Ackman's Pershing Square, according to sources familiar with the fund, has not covered any of its short positions in Herbalife. It ended January up roughly 4 percent, compared to a roughly 1.74 percent gain for the average hedge fund, according to a Bank of America/Merrill Lynch research analyst.
It's not known at what price Ackman began shorting shares of Herbalife, but he has said he began doing so last May when the stock was trading around $45 a share. The stock closed trading on Tuesday at $35.75 a share.
Pershing Square's better-than-average performance came mainly from the performance of other stocks in its portfolio such as Canadian Pacific Railway and Procter & Gamble, which both rose sharply in January. (Read More: Ackman: P&G Giving CEO 'Bit More Time' to Right Ship)
Meanwhile, Loeb's flagship Third Point Offshore fund was up 4.8 percent in January.
Still, there are some indications that another short squeeze could be in the offing, which raises the question of just how much pain and volatility Ackman and his investors can withstand.
Thomson Reuters StarMine compiles an indicator using a stock's volatility over the past three and 12 months and the level of short interest to predict the likelihood of a short squeeze over the next 30 days. On a scale of 1 to 100, with 100 meaning a short squeeze is very likely, Herbalife scores a 95.
Another way in which Ackman's big short could go against him is if Herbalife bought back a number of its outstanding shares, or if another company decided to make an offer for Herbalife.
"Companies often increase share repurchases when short selling increases," said Edward Swanson, a professor at the Mays Business School at Texas A&M University.
Herbalife already did exactly that when it increased a share buyback program in May after short-seller David Einhorn questioned the company's disclosures about its network of distributors.
Einhorn recently told his Greenlight Capital investors he is no longer shorting the stock. It's not known when he began shorting the company's shares.