The thesis
Dual-momentum is about as classic as systematic equity strategies get: hold the strongest-trending names by 60-day return, and exit when the trend breaks. It runs over a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, UNH, XOM and the like. The logic is sound and well-documented in the literature, but the implementation details are where strategies live or die. Here, the details tell a mixed story.
Backtest performance
Over 451 days the strategy returned 23.5%, compounding at a 12.52% CAGR and lifting a $10,000 book to $12,349.63. Headline risk numbers look respectable: a Sharpe of 0.95 and a max drawdown of 15.67%.
Two figures deserve a second look. The win rate is just 28.79% across 136 trades — but that is the expected signature of momentum, not a flaw. These strategies lose small and often while a handful of winners carry the book; the positive total return confirms the asymmetry is working. More concerning is turnover of 2,638% — the strategy churns its capital more than 26 times over the test window. Fees totalled only $136, but in a live account with wider spreads and slippage, that churn is a real headwind.
Validation: a failing grade
This is where the strategy stumbles. Validation did not pass. Across four walk-forward folds, three were positive, with out-of-sample returns of +13.34% (OOS Sharpe 2.15). Folds 3 and 4 were genuinely strong (+25.59% and +13.34%). But fold 2 — covering Jan–Jul 2025 — lost 7.31% with a 17.15% drawdown, the ugliest stretch in the record.
The statistical verdict is the real tell. The Probabilistic Sharpe Ratio is a healthy 0.893, but the Deflated Sharpe Ratio falls to 0.476 once you account for the six trials run during development. That gap between PSR and DSR is the classic fingerprint of selection bias: the strategy looks good partly because several variants were tried, and the best was kept. A DSR below the confidence threshold is why this one is flagged.
Recent activity: an empty book
The live comments are striking in their silence. The last six scheduled runs — 23 through 30 September — all read the same: 0 executed, 0 rejected, cash $10,000, total $10,000. The strategy is sitting entirely in cash, firing no signals. For a trend-follower that is a defensible posture when no name clears the momentum bar, but a week of flat books means zero live evidence is accumulating to counter the validation doubts.
Verdict
Dual-momentum has a coherent thesis and a backtest that flatters it. But a failed validation on a deflated Sharpe, punishing turnover, and a currently idle live book all argue for patience. The numbers are promising; the confidence is not there yet.