The thesis
Dual-momentum is a straightforward trend-follower: hold the strongest trending names by 60-day return, and exit when the trend breaks. It runs over a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy (AAPL, MSFT, NVDA, JPM, JNJ, XOM, and peers). The logic is deliberately simple, which is both its appeal and its constraint — it rides winners and cuts laggards, with no attempt to time reversals.
Headline performance
On paper, the numbers are respectable. The full backtest returns 23.5% over 451 days, ending at $12,349.63 from a $10,000 start — a 12.52% CAGR — with a 0.95 Sharpe and a 15.67% max drawdown. That's a reasonable risk-adjusted profile for a single-factor equity strategy.
Two caveats deserve attention. First, the win rate is just 28.79% across 136 trades. That is characteristic of trend-following — a minority of large winners carries the book — but it means the strategy is psychologically and statistically dependent on its tails. Second, turnover runs at 2,638%, extremely high. Fees totalled $136, modest here, but at scale or under wider spreads that churn would erode returns materially.
Validation: the strategy did not pass
This is the most important line in the report: validation failed. Under 4-fold walk-forward testing, 3 of 4 folds were positive, and out-of-sample results were actually strong on their own (OOS return 13.34%, OOS Sharpe 2.15). The Probabilistic Sharpe Ratio (0.893) is healthy, but the Deflated Sharpe Ratio is only 0.476 — and with 6 trials in the search, that deflation is exactly the point. Adjusted for how many configurations were tried, the edge is not convincingly distinguishable from luck.
The folds tell the story of that fragility:
| Fold | Window | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug'24–Jan'25 | +5.85% | 1.23 | 3.92% |
| 2 | Jan'25–Jul'25 | -7.31% | -1.05 | 17.15% |
| 3 | Jul'25–Dec'25 | +25.59% | 3.32 | 4.04% |
| 4 | Dec'25–May'26 | +13.34% | 2.15 | 7.43% |
Fold 2 is the warning: a losing, high-drawdown, high-trade (60) stretch when trends chopped sideways. The impressive aggregate leans heavily on Fold 3's 25.59% run. Momentum works until it whipsaws, and this history shows both faces.
Recent activity: parked in cash
Live behaviour is currently muted. The last six scheduled runs (Jul 7 through Jul 14) each report 0 executed, 0 rejected, with the book flat at $10,000 cash. No positions, no trades. Read charitably, the exit-on-trend-break rule is doing its job — declining to chase a universe with no clean leader. Read skeptically, a strategy that holds nothing is earning nothing.
Verdict
Dual-momentum has a coherent thesis and a decent aggregate track record, but it carries the classic trend-following risks — low hit rate, high turnover, and dependence on a few strong regimes — and it failed our deflated-Sharpe validation gate. It stays worth watching, not yet worth trusting. The current all-cash stance is a sensible place to wait for a clearer trend.