The Thesis
Dual-momentum runs a simple, well-worn idea: hold the strongest trending names by 60-day return, and exit when the trend breaks. It fishes in a 24-name pool of large-cap US equities spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH, PFE), staples (PG, KO, WMT), and energy (XOM, CVX). It's a trend-following approach, so we should expect the return profile that comes with it — few big winners, many small losers.
Backtest Performance
The headline numbers are genuinely attractive. Over 451 days the strategy returned 23.5% (final equity $12,349.63 on a $10,000 base, a 12.52% CAGR), with a Sharpe of 0.95 and a max drawdown of 15.67% across 136 trades.
Two details temper the enthusiasm. First, the win rate is just 28.79% — fewer than one trade in three is profitable. That's not a flaw on its own; it's the signature of trend-following, where a handful of large winners carry the book. But it means the equity curve leans hard on a small number of trades. Second, turnover is 2,638% — the strategy churns its capital many times over. Fees totalled only $136 here, but that level of trading is a real drag risk in any less forgiving cost environment.
Validation: The Red Flag
This is where the story turns cautious. Walk-forward validation failed. Across four folds, three were positive but fold 2 (Jan–Jul 2025) lost 7.31% with a Sharpe of -1.05 and a 17.15% drawdown — worse than the full-period drawdown. The strategy's fortunes swung wildly by regime: fold 3 returned 25.59% at a Sharpe above 3, fold 4 a respectable 13.34%.
The statistical gates confirm the unease. The Probabilistic Sharpe Ratio (0.893) looks healthy, but the Deflated Sharpe Ratio is only 0.476 — once you adjust for the six trials run, the edge is no longer convincingly distinguishable from luck. That deflation is exactly why the auto-deploy gate withheld its blessing.
Recent Activity: Nothing Is Happening
Despite being marked live, the account has done nothing. The last six scheduled runs (July 31 through August 7) each report 0 executed, 0 rejected, with cash and total equity both frozen at $10,000. No trades appear in the recent-trades log at all.
That could be benign — no name currently clears the momentum threshold, so the strategy sits in cash by design. But a week of total inactivity on a live, high-turnover strategy deserves a second look: it may signal a stalled data feed, a mis-set threshold, or simply a trendless tape.
Verdict
Dual-momentum has a coherent thesis and a flattering backtest, but the failed validation and marginal DSR say the edge is fragile and regime-dependent. Combined with a live account that hasn't traded in a week, this is one to watch closely — not one to size up.