The thesis
Dual-momentum is a trend-following strategy with a simple rule: hold the strongest-trending names by 60-day return, and exit when the trend breaks. It runs across a 24-name universe of US large caps — mega-cap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), and defensives (PG, KO, WMT). It is currently live.
Recent activity
The most striking thing about the last week is what didn't happen. Across six scheduled runs (Sept 7 through Sept 14), the strategy executed zero trades each time, holding $10,000 in cash for a total portfolio value of exactly $10,000. In trend-following terms, that means no name in the universe currently clears the momentum threshold, or existing positions have already been stopped out on trend breaks. Sitting in cash is a legitimate momentum state, not a bug — but it also means the strategy is contributing nothing right now.
Backtest and validation
The headline backtest is attractive: +23.5% total return over 451 days, a 12.52% CAGR, final equity of $12,349.63, and a 0.95 Sharpe with a 15.67% max drawdown. Those are respectable numbers for a long-only equity strategy.
But the details demand caution. The win rate is just 28.79% across 136 trades — typical for momentum, where a few large winners carry many small losers, but it leaves the strategy dependent on tail outcomes. Turnover is a heavy 2,638%, so frictions matter; fees already total $136.
Most important: validation did not pass. Walk-forward testing splits the sample into four folds:
| Fold | Window | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug'24–Jan'25 | +5.85% | 1.23 | 3.92% |
| 2 | Jan'25–Jul'25 | −7.31% | −1.05 | 17.15% |
| 3 | Jul'25–Dec'25 | +25.59% | 3.32 | 4.04% |
| 4 | Dec'25–May'26 | +13.34% | 2.15 | 7.43% |
Three of four folds are positive, and out-of-sample returns (+13.34%, OOS Sharpe 2.15) hold up well. The Probabilistic Sharpe Ratio is a strong 0.893. So why the fail? The Deflated Sharpe Ratio is only 0.476 — below the 0.5 bar — because the result is drawn from 6 trials, and the deflation penalises that multiple-testing. Fold 2's −7.31% with a 17% drawdown shows the regime risk: when trends whipsaw, this strategy bleeds.
Verdict
The strengths are real: solid OOS behaviour, high PSR, and clean risk in three of four folds. But the failed DSR gate and the ugly fold-2 drawdown are honest warnings that the edge may be partly selection luck. Combined with a week of no positions, dual-momentum reads as promising but unproven — worth watching live, not yet worth conviction.