Thesis
Dual-momentum is a trend-following strategy with a deliberately 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), healthcare (JNJ, UNH), and staples (PG, KO, WMT). The status is live.
Headline Performance
On paper, the backtest is respectable. Over 451 trading days the strategy returned 23.5%, compounding to a 12.52% CAGR and lifting a starting book to a final equity of $12,349.63. Sharpe came in at 0.95, with a maximum drawdown of 15.67%.
Two numbers deserve a second look. The win rate is only 28.79% across 136 trades — normal for momentum, where a few large winners carry a majority of small losers, but it means conviction and discipline matter more than hit rate. More striking is turnover of 2,638%: the book effectively recycles itself many times over, and while total fees ($136) stayed modest here, that churn is a real-world cost and slippage risk.
Validation: The Gate Says No
This is where the story turns cautionary. The walk-forward validation did not pass. Across four out-of-sample folds, three were positive — but the dispersion is wide:
- Fold 1: +5.85% (Sharpe 1.23)
- Fold 2: −7.31% (Sharpe −1.05, 17.15% drawdown)
- Fold 3: +25.59% (Sharpe 3.32)
- Fold 4: +13.34% (Sharpe 2.15)
One blockbuster fold (Fold 3) does a lot of the heavy lifting, and the single losing fold produced the worst drawdown of the set. Aggregate out-of-sample return was a solid 13.34% at a 2.15 Sharpe, and the Probabilistic Sharpe Ratio of 0.893 is encouraging. But the Deflated Sharpe Ratio — which penalizes for the 6 trials run during search — sits at just 0.476, and that, alongside the uneven folds, is why the gate held the strategy back. The takeaway: the edge is real in trending regimes but fragile, and some of the headline Sharpe is likely selection luck.
Recent Activity: Fully in Cash
The live book tells its own story. The six most recent scheduled runs (2026-07-24 through 2026-07-31) all report the same line: 0 executed, 0 rejected, cash $10,000, total $10,000. The strategy is doing exactly what a trend-follower should when no name clears its trend filter — nothing. It is sitting entirely in cash, waiting for a qualifying signal.
That is defensible behaviour, but it also means there is no recent live P&L to evaluate, and a strategy that stays flat for extended stretches carries opportunity cost the backtest does not capture.
Verdict
Dual-momentum has a coherent thesis and attractive top-line metrics, but the validation gate is the honest scorecard here — and it flags fragility, trial-driven optimism (low DSR), and a heavy dependence on catching trending regimes. Combined with a book currently parked in cash, this is a strategy to watch rather than to trust with size. The next trending leg will be the real test.