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. Its universe is 24 large-cap US stocks spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT), healthcare (JNJ, UNH), and energy (XOM, CVX). This is textbook cross-sectional momentum — concentrate into what is already working, cut losers quickly. It is a strategy that lives or dies on trend persistence.
Recent activity
Here the story gets quiet. Across the last six scheduled runs (2026-08-04 through 2026-08-11), the strategy executed zero trades and rejected zero candidates, holding a full $10,000 in cash the entire time. In other words, nothing in the universe currently clears its trend filter. That is not a bug — it is the design. A momentum system that refuses to chase weak trends will spend stretches on the sidelines. Still, an idle book earns nothing, and readers should understand that today the strategy is expressing a view by not being invested.
Backtest performance
On paper the historical record is respectable. Over 451 days the strategy returned 23.5% (CAGR 12.52%, final equity $12,349.63) with a Sharpe of 0.95 and a max drawdown of 15.67%. The catch is turnover: 2,638% annualized across 136 trades, with a 28.79% win rate. That combination — low hit rate, high churn — is classic trend-following, where a handful of large winners pay for many small losses. It works only if the fat tails keep showing up, and it makes the strategy sensitive to transaction costs and slippage that a paper backtest understates.
Validation: it did not pass
Our walk-forward gate flagged this strategy as failed, and the detail explains why. Across four folds, three were positive but one was decisively not: fold 2 (Jan–Jul 2025) lost 7.31% with a -1.05 Sharpe and a 17.15% drawdown on 60 trades — the strategy's worst regime, when trends whipsawed. Folds 1, 3, and 4 were strong (up to 25.59% with a 3.32 Sharpe in late 2025).
The aggregate statistics are mixed: out-of-sample return of 13.34% and OOS Sharpe of 2.15 look good, and the Probabilistic Sharpe Ratio of 0.893 is encouraging. But the Deflated Sharpe Ratio is only 0.476 — below the confidence threshold once you account for the 6 trials run during development. In plain terms: after adjusting for how many variants we tried, we cannot be confident the edge is real rather than a lucky fit.
The balanced take
Dual-momentum has a coherent thesis, a clean rule set, and genuinely good stretches — fold 3 and the late-2025 run are hard to ignore. But the single ugly fold, the sub-threshold DSR, the low win rate, and the punishing turnover are all reasons for restraint. It remains live for observation, not conviction. The current all-cash posture is a useful reminder that its best trait — patience — is also why it can go weeks contributing nothing. We would want to see it deploy capital into a real trend and survive another adverse regime before trusting it with size.