Thesis
Dual-momentum runs a straightforward trend-following rule: hold the strongest-trending names by 60-day return from a 24-stock large-cap universe (AAPL, MSFT, NVDA, JPM, V, JNJ, XOM, and peers), and exit on a trend break. It is a well-worn factor with decades of academic support, and the concept translates cleanly into a rules-based paper-trading agent.
Headline Performance
On the full backtest, the numbers look attractive: a 23.5% total return over 451 days, growing $10,000 to $12,349.63, a 12.52% CAGR, and a Sharpe of 0.95 against a 15.67% max drawdown. But the internals warn against taking that at face value. The win rate is just 28.79% across 136 trades — profits ride on a handful of large winners, which is normal for momentum but leaves returns lumpy and path-dependent. Turnover is extreme at 2,638%, so the strategy churns its book many times over; the $136 in fees is modest here but would scale with size and spreads.
Validation: Not Passed
The walk-forward validation gate failed. Across four out-of-sample folds, three were positive, but the pattern is uneven:
- 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
Aggregate out-of-sample return was 13.34% with an OOS Sharpe of 2.15 — respectable, but concentrated in the strong Fold 3. The deflated Sharpe ratio (DSR 0.476) sits below the 0.5 bar even after only 6 trials, and while the probabilistic Sharpe (PSR 0.893) is encouraging, the failed gate reflects the fragility that Fold 2's loss exposes: in the wrong regime, the strategy gives back real capital.
Recent Activity: Idle in Cash
Most telling is the live tape. The last six scheduled runs (2026-07-21 through 07-28) each report 0 executed, 0 rejected, with the book flat at $10,000 cash, $10,000 total. No positions, no trades. The trend filter is currently finding nothing worth holding — a defensible, capital-preserving stance, but it means the live agent has yet to put its thesis to work and there is no realized track record to point to.
Verdict
Dual-momentum has a sound thesis and a flattering backtest, but it is not validated: a losing fold, a sub-threshold DSR, and a low win rate all argue for caution. Right now it is parked in cash. The honest read is promising but unproven — worth watching, not yet worth trusting.