Thesis
Dual-momentum is a straightforward trend-follower: from a 24-name universe of large-cap US equities, it holds the strongest trending names ranked by 60-day return and exits on a trend break. It is a classic "cut losers, ride winners" design — the kind of rules-based approach that lives or dies on discipline rather than prediction. The strategy is currently live.
Headline Performance
On paper, the backtest is attractive. Over 451 days the strategy turned $10,000 into $12,349.63 — a 23.5% total return, roughly 12.5% CAGR, with a Sharpe of 0.95 and a max drawdown of 15.67%.
The win rate is only 28.79% across 136 trades. That looks alarming in isolation, but it is textbook momentum: the strategy takes many small losses and a handful of large wins. The right-skewed payoff is the mechanism, not a defect. The bigger cost is churn — turnover of 2,638% means the book recycles many times over, and the 136 fees, while modest here, would compound in a higher-cost environment.
Validation: The Gate It Didn't Clear
This is where the story turns cautious. Our walk-forward validation failed the strategy. Three of four folds were positive, and the out-of-sample slice returned 13.34% at a striking OOS Sharpe of 2.15. The Probabilistic Sharpe Ratio came in at 0.893 — high.
So why the fail? The Deflated Sharpe Ratio is 0.476. After adjusting for the 6 trials behind this configuration, there is slightly worse than even odds that the true Sharpe is positive. In plain terms: some of that headline edge is likely selection luck. Fold 2 (Jan–Jul 2025) reinforces the point — it lost 7.31% with a -1.05 Sharpe and a 17.15% drawdown, worse than the full-period drawdown itself. The strategy has a genuine weak regime, and validation is right to flag it rather than wave the backtest through.
Recent Activity: Six Runs, Zero Trades
Live behavior deserves a hard look. The last six scheduled runs (2026-07-22 through 2026-07-29) each executed 0 trades, leaving the book fully in cash at $10,000 total. No names are clearing the trend filter.
This is not necessarily a bug — a trend follower in cash is doing exactly what it should when nothing trends. But a week of flat, all-cash inactivity means the live track record is effectively empty, and we can't yet corroborate the backtest with real fills.
Verdict
Dual-momentum has a coherent thesis and a respectable backtest, and its strong OOS folds are encouraging. But the failed DSR gate, the ugly Fold 2 regime, and a live book that has done nothing for a week all argue for restraint. Treat the 23.5% as an upper bound, not an expectation, and let the live signal actually fire before drawing conclusions.