84
The ACB shareholder in this case increased her share holdings of ACB by 10.2%. The share price of ACB would face downward pressure while the share price of CMED would face upward pressure to move the ratio closer to 3.4 and that is what happened and that is exactly why we see the change in β. On January 26, the ratio had fallen to 2.96. The Arbitrage had widened. Warrant holders of ACB have an even larger spread. They can sell their warrants on the open market and use the proceed to buy CMED shares or exercise them ($4 strike price) and then sell those shares to buy CMED.
So what does β tell us in this case? The β should move closer to 1 which is where it was before the terms of the friendly merger were announced. That it has fallen to 0.20 suggests the share price of ACB is less volatile than CMED and we have seen that in the share price of the two in the week of Jan 22 to Jan 26 meaning that the CMED share price has yet to settle at a multiple of 3.40 of the share price of ACB suggesting that there may be an “arbitrage” opportunity. And we just shown that to be true. That is the power of tracking β. That is the CannaInvestor Advantage because we do not see the paid promoter who has ACB as a client spreading the word of this opportunity. This real life happening “now” scenario is one more example of the risks of following paid promoters who present themselves as unbiased industry experts.
As for calculating Beta – well it is not as hard as you may think.