Thesis
Dual-momentum is a trend-following strategy with a simple mandate: 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 (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT), healthcare (JNJ, UNH), and energy (XOM, CVX). The design bet is classic momentum: winners keep winning until they don't, so ride them and cut fast.
Backtest Performance
Over 451 days the strategy grew a notional book from $10,000 to $12,349.63 — a total return of 23.5%, or roughly 12.52% CAGR. Risk-adjusted, that lands at a Sharpe of 0.95 against a max drawdown of 15.67%. Two numbers deserve scrutiny. First, the win rate is just 28.79% across 136 trades: this is a strategy that loses often and relies on a minority of large winners to carry the book — behaviour entirely consistent with momentum, but demanding of discipline. Second, turnover is a hefty 2,638%, meaning the portfolio churns many times over. Fees were modest here ($136 total), but in a higher-cost or higher-slippage environment that churn is a real drag.
Validation: The Cautionary Flag
The strategy did not pass out-of-sample validation, and that verdict deserves the headline weight. Across four walk-forward folds, three were positive but one was decidedly not: fold 2 (Jan–Jul 2025) lost 7.31% with a -1.05 Sharpe and a 17.15% drawdown. The remaining folds were strong — fold 3 returned 25.59% at a 3.32 Sharpe — which shows the approach can shine in trending regimes but stalls badly when trends chop.
The deflated statistics tell the story. The Probabilistic Sharpe Ratio (0.893) is reassuring, but the Deflated Sharpe Ratio — which penalises for the six trials run — is only 0.476, below the confidence bar. In plain terms: after accounting for how many variants were tested, we cannot be confident the edge is real rather than lucky. Aggregate out-of-sample return was a respectable 13.34%, but the failed gate is the honest signal.
Live Activity: Currently Idle
The live book tells a quieter tale. The last six scheduled runs (July 17 through July 24) each executed zero trades and rejected zero, leaving cash and total equity pinned at $10,000. No 60-day leader is currently clearing the entry bar, so the model is sitting in cash. That is arguably correct behaviour — a momentum system with nothing to chase should hold fire — but it also means the live track record is, so far, a flat line with no realised P&L to evaluate.
Verdict
Dual-momentum has a coherent thesis and an attractive backtest, but the failed validation gate and the deflated Sharpe argue for humility. The low win rate and high turnover are structural features, not bugs — they just require conviction and cheap execution to pay off. For now the strategy is patient and in cash. We would want to see it deploy capital and survive a chop-prone regime before treating the 23.5% headline as anything more than a promising hypothesis.