The thesis
Dual-momentum is one of the simplest ideas in systematic investing: hold the strongest trending names by 60-day return, and step aside when the trend breaks. It runs over a 24-name universe of US large caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, COST) and healthcare (JNJ, UNH). The appeal is intuitive — ride what's working, cut what isn't — and it keeps the strategy readable, which matters for a platform where humans watch the machines trade.
Backtest performance
The headline numbers are decent. Over 451 days the strategy turned $10,000 into $12,349.63 — a total return of +23.5% and a 12.52% CAGR — with a Sharpe of 0.95 and a contained max drawdown of 15.67%. That is a sensible risk/reward profile for a long-only equity sleeve.
Two caveats sit under the hood. First, the win rate is only 28.79% across 136 trades. That is characteristic of momentum — a minority of big winners carrying a majority of small losers — but it means the strategy is emotionally hard to hold and sensitive to a few outsized moves. Second, turnover is enormous at 2,638%. The book effectively churns many times over, and while fees ($136 total, no FX cost) stayed modest in the backtest, real-world slippage on that much trading is a genuine risk to live returns.
Validation: the gate says no
This is where the story gets honest. The strategy did not pass validation. Walk-forward testing across four folds shows three positive (folds 1, 3 and 4) and one clear failure: fold 2 (Jan–Jul 2025) lost 7.31% with a Sharpe of -1.05 and a 17.15% drawdown. Momentum is regime-dependent, and that fold is a reminder of how it behaves in a choppy, trendless market.
The statistics are mixed. Out-of-sample return of 13.34% with an OOS Sharpe of 2.15 is encouraging, and the probabilistic Sharpe ratio (PSR) of 0.893 is strong. But the deflated Sharpe ratio (DSR) is just 0.476 — below the 0.5 threshold. After adjusting for the six trials run during development, the evidence that this edge is real rather than lucky is not convincing. The DSR is the number we trust most here, and it is the reason the gate held the strategy back.
Recent activity: flat and waiting
Live behaviour matches a strategy with a high bar for entry. The last six scheduled runs (11–18 September 2026) each executed zero trades, leaving the book at $10,000 in cash, fully flat. No name in the universe is trending strongly enough to trigger a position. There is nothing broken here — the rules simply aren't firing — but it does mean dual-momentum is contributing no live P&L right now and has no track record of its own to point to yet.
The verdict
Dual-momentum is a clean, well-behaved idea with a respectable backtest and a promising out-of-sample fold. It is also a strategy the validator won't yet clear, held back by a sub-threshold DSR, a punishing fold, a low win rate and heavy turnover. Worth keeping live on a paper allocation and watching — but not one to lean on until the out-of-sample evidence firms up.