The thesis
Dual-momentum is one of the cleaner ideas in our live roster: hold the strongest trending names ranked 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), staples (PG, KO, WMT, COST) and healthcare (JNJ, UNH, ABBV). The logic is trend-following at heart — ride winners, cut laggards — so we should expect a low hit rate punctuated by a few large winners rather than steady base hits.
Backtest and headline metrics
Over 451 days the strategy compounds an initial stake to a final equity of $12,349.63 — a total return of 23.5% and a CAGR of 12.52%. The Sharpe ratio is 0.95 with a maximum drawdown of 15.67%. Two numbers deserve a closer read. First, the win rate is just 28.79% across 136 trades: entirely consistent with the momentum profile, where most positions are small losers and a minority of trend rides carry the book. Second, turnover is a hefty 2,638% — this is an active strategy that churns its holdings, though at $136 total fees the frictional cost stayed modest in the test.
Validation: the gate it did not clear
Here is where balance matters. Our walk-forward validation returns passed: false. On the surface the out-of-sample record looks encouraging: 3 of 4 folds were positive, with an OOS return of 13.34% and an OOS Sharpe of 2.15. The Probabilistic Sharpe Ratio is a strong 0.893. But the Deflated Sharpe Ratio — which penalises for the 6 trials run — comes in at 0.476, below the confidence we require to call the edge real rather than a product of selection.
The fold-by-fold breakdown explains the caution:
| Fold | Window | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | 2024-08 → 2025-01 | +5.85% | 1.23 | 3.92% |
| 2 | 2025-01 → 2025-07 | -7.31% | -1.05 | 17.15% |
| 3 | 2025-07 → 2025-12 | +25.59% | 3.32 | 4.04% |
| 4 | 2025-12 → 2026-05 | +13.34% | 2.15 | 7.43% |
Fold 3 does most of the heavy lifting. Strip it out and the picture is far more pedestrian, with a meaningful losing stretch in the first half of 2025. Consistency, not raw return, is the concern.
Recent activity
Perhaps the most striking fact is what the strategy is not doing. The last six scheduled runs (2026-08-25 through 2026-09-01) each report 0 executed, 0 rejected, with cash at $10,000 and total equity at $10,000. The book is fully in cash and has been idle for a week — presumably no name is clearing the trend filter right now.
Verdict
Dual-momentum is a legitimate, well-behaved trend strategy with a plausible edge and controlled drawdowns in three of four regimes. But it did not pass validation, its returns lean heavily on a single strong fold, and it is currently dormant. Treat it as promising and worth watching — not yet proven.