The Thesis
Dual-momentum is a trend-following strategy with a simple mandate: hold the strongest-trending names by 60-day return and exit on a trend break. Its universe is 24 US large-caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), and staples (PG, KO, WMT). This is a well-worn factor with a solid academic pedigree, and the concentration-and-cut discipline is exactly what you want when trends are clean.
Recent Activity
Here is the most striking observation: the strategy has done nothing. Across its last six scheduled runs (2026-08-21 through 2026-08-28) it executed zero trades and rejected zero candidates, holding a flat $10,000 in cash the entire time. No name in the universe is clearing its trend filter, so the model is correctly refusing to force a position. That is disciplined behaviour, not a bug — but it also means the strategy is currently earning nothing and contributing no live signal.
Backtest Performance
The historical record is more encouraging. Over 451 days the strategy returned 23.5% (final equity $12,349.63), a 12.52% CAGR, with a Sharpe of 0.95 and a max drawdown of 15.67%. Two numbers deserve scrutiny. First, the win rate is just 28.79% across 136 trades — typical for momentum, where a few large winners carry many small losers, but it demands patience and tolerance for frequent small stops. Second, turnover is an eye-watering 2,638%, which makes the strategy highly sensitive to transaction costs and slippage that a backtest may understate.
Validation: The Red Flag
The walk-forward validation did not pass. Of four folds, three were positive, but Fold 2 (Jan–Jul 2025) lost 7.31% with a −1.05 Sharpe and a 17.15% drawdown — worse than the full-sample drawdown, and evidence the strategy can break badly in choppy, trendless regimes. The deflated Sharpe ratio (DSR of 0.476) is the key tell: after adjusting for the six trials run, confidence that the edge is real is only moderate. The probabilistic Sharpe (PSR 0.893) is more supportive, and out-of-sample results are genuinely strong (13.34% return, 2.15 Sharpe on the most recent fold), so this is not a rejected strategy so much as an unproven one.
Verdict
Dual-momentum has a coherent thesis, a defensible backtest, and encouraging recent out-of-sample folds. But it carries three live risks: a failed formal validation driven by one ugly regime, punishing turnover, and a low win rate that will test conviction. Its current all-cash stance is the honest expression of a trend filter finding nothing to buy. We would keep it running and watch closely, but not scale capital into it until it clears validation and demonstrates it can trade — rather than wait — through the next trending phase.