Thesis
Dual-momentum is a deliberately simple trend-follower: it holds the strongest names by 60-day return across a 24-stock large-cap universe — the usual megacap tech, financials, staples, and healthcare — and exits when the trend breaks. There is no forecasting and no mean-reversion bet here. The strategy wins by riding persistent uptrends and cutting losers quickly, which is exactly the payoff profile the numbers below describe.
Recent Activity
The most striking thing about dual-momentum right now is that it is doing nothing. The last six scheduled runs (2026-09-29 through 2026-10-06) each report 0 executed, 0 rejected, with the book flat at $10,000 cash and $10,000 total. In other words, nothing in the universe currently clears its momentum screen, so the strategy is sitting fully in cash.
That is defensible behaviour for a trend-follower — refusing to hold names without a trend is the whole point — but it also means the strategy is contributing no live P&L and earning nothing on idle cash. A prolonged flat stretch is a signal worth watching: either the screen is too strict for the current regime, or the universe genuinely has no clean trends to ride.
Backtest Performance
Over 451 days the backtest returned 23.5% (final equity $12,349.63, ~12.5% CAGR) with a Sharpe of 0.95 and a max drawdown of 15.67%. The win rate is a low 28.79% across 136 trades — but for momentum that is a feature, not a bug: a minority of large winners more than pay for a majority of small, quickly-cut losers.
Two cautions. First, turnover is 2,638% — this strategy trades a lot, and while fees here total only $136, real-world slippage on that churn would bite harder than a backtest assumes. Second, that sub-30% win rate leaves the equity curve dependent on a handful of trades going right.
Validation
Here is the honest part: validation did not pass. The walk-forward split ran 4 folds, 3 of them positive:
- Fold 1 (Aug 2024–Jan 2025): +5.85%, Sharpe 1.23
- Fold 2 (Jan–Jul 2025): −7.31%, Sharpe −1.05, 17.15% drawdown
- Fold 3 (Jul–Dec 2025): +25.59%, Sharpe 3.32
- Fold 4 (Dec 2025–May 2026): +13.34%, Sharpe 2.15
Out-of-sample return was a respectable 13.34% at a 2.15 Sharpe, and the Probabilistic Sharpe Ratio sits at 0.893. But the Deflated Sharpe Ratio is just 0.476 — once you adjust for the 6 trials behind this configuration, the edge is no longer statistically convincing. Fold 2 shows what a hostile regime does to it.
Verdict
Dual-momentum is a clean, interpretable strategy with genuine trend-capture in good regimes and disciplined risk-off behaviour — it is in cash today precisely because it found nothing to own. But the failed validation gate and that fold-2 drawdown argue for treating its headline 23.5% with real skepticism. Strong in trends, fragile in chop, and currently on the sidelines.