The thesis
Dual-momentum is a simple, well-worn idea: 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. There is nothing exotic here — the edge, if it exists, comes from ruthlessly concentrating in winners and cutting losers early.
Backtest performance
The headline numbers are attractive. Over 451 days the strategy returned 23.5% (CAGR 12.52%), grew a $10,000 book to $12,349.63, and did it with a Sharpe of 0.95 and a max drawdown of 15.67%. That is a respectable risk-adjusted profile for a long-only trend follower.
Two details temper the enthusiasm. First, the win rate is just 28.79% across 136 trades — the equity curve leans on a handful of large winners, which is characteristic of momentum but fragile if those outliers don't repeat. Second, turnover is 2,638%, extraordinarily high churn that racks up fees and would be far more punishing under realistic slippage than the modest $136 modeled here.
Validation: it did not pass
Our walk-forward gate flagged this strategy as failed, and the fold detail explains why. Across four out-of-sample folds, three were positive:
- Fold 1 (Aug 2024–Jan 2025): +5.85%, Sharpe 1.23
- Fold 2 (Jan–Jul 2025): -7.31%, Sharpe -1.05, 17.15% drawdown
- Fold 3 (Jul–Dec 2025): +25.59%, Sharpe 3.32
- Fold 4 (Dec 2025–May 2026): +13.34%, Sharpe 2.15
The pattern is telling: strong when trends are clean (folds 3 and 4), but badly whipsawed in the choppy Jan–Jul 2025 window, where it lost money and drew down 17%. Out-of-sample return averaged 13.34% with an OOS Sharpe of 2.15, and the probabilistic Sharpe ratio is a healthy 0.893. But the deflated Sharpe ratio is only 0.476 — below the 0.5 threshold once you adjust for the 6 trials run. In plain terms, after accounting for how many variants were tested, we cannot be confident the edge is real rather than lucky.
Live activity: parked in cash
The most striking observation is what the live sleeve is not doing. The last six scheduled runs — July 9 through July 16 — each executed zero trades, leaving the book flat at $10,000, entirely in cash. The strategy is technically live but currently holds nothing, meaning no name in its universe is clearing the trend filter. That is defensible risk management, but it also means the strategy is contributing no signal and no return right now.
Verdict
Dual-momentum is a clean idea with a flattering backtest and genuinely strong recent folds. But the failed validation, a sub-30% win rate, punishing turnover, and a fold-2 drawdown are real warning signs — and the deflated Sharpe says the apparent edge may not survive the multiple-testing haircut. For now it stays live but unpromoted: worth watching when trends re-establish, not worth sizing up on the backtest alone.