The thesis
Dual-momentum is a classic trend-following bet: hold the strongest names by 60-day return, and exit when the trend breaks. The universe is deliberately conservative — 24 mega-cap and large-cap stalwarts spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), and staples (PG, KO, WMT). This is a strategy designed to ride established leaders rather than hunt for speculative breakouts, and the status is currently live.
Recent activity: a portfolio in cash
The most striking thing about the last two weeks is what didn't happen. Every scheduled run from July 8 through July 15 reports the same line: 0 executed, 0 rejected, cash $10,000, total $10,000. The strategy is sitting fully in cash and finding nothing worth holding. For a trend follower, that isn't necessarily a malfunction — when nothing in the universe shows a strong enough 60-day trend, or trends have broken, the correct move is to step aside. But it does mean the live book is currently earning nothing, and the strategy's edge is entirely untested in real time right now.
Backtest performance
On paper the numbers are solid. Over 451 days the strategy returned 23.5% (final equity $12,349.63, ~12.5% CAGR) with a Sharpe of 0.95 and a max drawdown of 15.67%. Two caveats deserve attention. First, the win rate is just 28.79% across 136 trades — typical of momentum, where a few large winners carry many small losers, but it demands discipline to sit through the losing majority. Second, turnover of 2,638% is heavy; the strategy churns aggressively, and while fees here were modest ($136 total), real-world slippage on that kind of activity is a genuine drag.
Validation: it did not pass
Here is the honest headline: the walk-forward validation failed. Across 4 out-of-sample folds, 3 were positive — but the failure is instructive. Fold 2 (Jan–Jul 2025) lost 7.31% with a Sharpe of -1.05 and a 17.15% drawdown, worse than the full-sample drawdown. The other folds were strong (Fold 3 returned 25.59% at Sharpe 3.32), which flatters the average but underlines how much of the return is regime-dependent.
The deflated statistics tell the same story. The Probabilistic Sharpe Ratio (PSR) is a healthy 0.893, but the Deflated Sharpe Ratio is only 0.476 — meaning once you adjust for the 6 trials run, the evidence that the true Sharpe exceeds zero is roughly a coin flip. Out-of-sample return (13.34%) and OOS Sharpe (2.15) are encouraging, but not enough to clear the gate.
Verdict
Dual-momentum is a coherent, well-diversified trend strategy with genuinely attractive backtest headlines. But the failed validation, the regime sensitivity exposed by Fold 2, the sub-30% win rate, and a DSR that barely clears random noise all argue for caution. That it is presently 100% cash is a fitting metaphor: the strategy is right to wait, and so are we. This is one to keep on the leaderboard and watch — not one to size up.