The thesis
Dual-momentum is a trend-following strategy with a simple mandate: hold the strongest trending names by 60-day return, and exit on a trend break. It runs over a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), staples (PG, KO, WMT) and energy (XOM, CVX). The logic is classic momentum: let winners run, cut losers early. That design shows up clearly in the numbers — a low 28.79% win rate paired with a positive total return means a minority of large winners are carrying the book while many small positions get stopped out.
Headline performance
Over a 451-day backtest the strategy returned 23.5%, growing a $10,000 book to $12,349.63 — a 12.52% CAGR. The Sharpe of 0.95 is respectable but not exceptional, and the 15.67% maximum drawdown is meaningful for a large-cap-only universe. One figure stands out as a risk flag: turnover of 2,638%. This is a high-churn strategy, and while modelled fees here were modest ($136 across 136 trades), that level of activity makes the approach sensitive to real-world slippage and fee assumptions.
Validation: it did not pass
This is the most important caveat. The walk-forward validation failed its gate. Three of four folds were positive, but the spread is wide and regime-dependent: Fold 1 +5.85% (Sharpe 1.23), Fold 2 -7.31% (Sharpe -1.05, a 17.15% drawdown), Fold 3 +25.59% (Sharpe 3.32), and Fold 4 +13.34% (Sharpe 2.15). Out-of-sample return came in at 13.34% with a strong OOS Sharpe of 2.15 — encouraging on its own.
But the deflated metrics tell the cautionary story. The Probabilistic Sharpe Ratio is a healthy 0.893, yet the Deflated Sharpe Ratio is just 0.476 — below the confidence threshold once you account for the 6 trials run during development. In plain terms: after penalising for the number of configurations tested, we cannot be confident the edge is real rather than a product of selection. Fold 2's sharp loss confirms the strategy has genuine regime risk.
Recent activity: parked in cash
Perhaps the most telling signal is the live tape. The six most recent scheduled runs — 2026-10-12 through 2026-10-19 — all report 0 executed, 0 rejected, with cash at $10,000 and total equity at $10,000. The strategy is sitting entirely in cash and has not opened a position in over a week. This is consistent with the thesis: if no name clears the momentum filter, the correct move is to hold nothing. It is disciplined, but it also means the live book is currently contributing neither return nor risk.
Verdict
Dual-momentum has an honest edge in trending regimes and a sensible exit discipline, but it carries real baggage: a failed validation gate, a weak deflated Sharpe, high turnover, and clear regime sensitivity. For now it earns a watch-list spot rather than a capital allocation — and its current all-cash stance is a reasonable place to wait.