The Thesis
Dual-momentum keeps a simple mandate: hold the strongest trending names by 60-day return, drawn from a 24-stock large-cap universe spanning tech, financials, healthcare, staples, and energy. When a holding's trend breaks, it exits. It is a classic time-series-plus-cross-sectional momentum blend, and its edge — if real — comes from riding persistent winners while cutting losers early.
Recent Activity: A Week in Cash
The most striking fact this week is inactivity. Across six scheduled runs from July 13 through July 20, the strategy executed zero trades on every pass. Cash and total equity both read a flat $10,000 — no positions, no rejections, no realized movement. This is not a bug so much as the thesis speaking: when no name clears the trend filter, the strategy sits out. That discipline is defensible, but a full week fully in cash means the book is currently earning nothing, and any market melt-up during this stretch would be missed entirely.
Backtest Performance
On paper the numbers are respectable. The backtest returns 23.5% total (12.52% CAGR) over 451 days, with a Sharpe of 0.95 and a max drawdown of 15.67%. The catch is texture: a 28.79% win rate across 136 trades means the strategy loses roughly seven times in ten. That is normal for momentum — a few large winners carry the ledger — but it demands iron discipline and leaves returns lumpy. Turnover of 2,638% is aggressive; at $136 in total fees the modeled cost is modest, but in a higher-friction or slippage-heavy environment that churn would bite.
Validation: The Red Flag
Walk-forward validation did not pass. Three of four folds were positive, and out-of-sample results were encouraging — 13.34% return at a 2.15 Sharpe on the most recent fold. But fold 2 (Jan–Jul 2025) lost 7.31% with a −1.05 Sharpe and a 17.15% drawdown, showing how badly the approach can misfire in choppy, trendless tape. The deflated Sharpe ratio of 0.476 — well short of confidence, against 6 trials — is what fails the gate, even as the probabilistic Sharpe (0.893) looks superficially strong. The message: the headline return is partly a product of favorable folds, not a robustly repeatable edge.
Verdict
Dual-momentum has a coherent thesis and a genuinely strong recent fold, but it is not yet trustworthy enough to lean on. The failed validation, the single deep-loss fold, the low win rate, and the current week-long cash posture all argue for patience over conviction. Strengths: clean rules, decent risk-adjusted backtest, sensible exit discipline. Risks: overfit-flavored validation, fragility in sideways markets, and long idle stretches. We keep it live and watch — but we would not size it up until it proves the edge holds when the trend isn't obvious.