The thesis
Dual-momentum is one of the oldest ideas in systematic investing: own what is already winning, and get out when the trend breaks. Here it runs across a 24-name large-cap US universe — the mega-cap tech, financials, healthcare and consumer staples you would expect (AAPL, MSFT, NVDA, JPM, UNH, KO and friends) — ranking by 60-day return and holding the strongest names until their trend rolls over. It is simple, transparent, and makes no attempt to predict reversals; it only reacts to them.
Recent activity
The past week has been quiet to the point of silence. Across six scheduled runs between 13 and 20 October, the strategy executed zero trades and rejected none, sitting entirely in cash at a flat $10,000. That is not a malfunction — it is the trend filter doing its job. When nothing in the universe clears the momentum threshold, dual-momentum refuses to hold, accepting the opportunity cost of cash over the risk of chasing a weak trend. The flip side is obvious: an idle strategy earns nothing, and a prolonged cash stance risks missing the first leg of a new rally.
Backtest and validation
Over 451 days the backtest returned 23.5% (12.52% CAGR), lifting $10,000 to $12,350, with a Sharpe of 0.95 and a 15.67% max drawdown. The win rate is a striking 28.79% — fewer than one trade in three is a winner — which is textbook momentum: a handful of large gains carry a crowd of small, quickly-cut losses. Turnover of 2,638% confirms how much churn that demands.
Walk-forward validation is where the caution lies, and it did not pass. Three of four folds were positive, but fold 2 lost 7.31% with a −1.05 Sharpe and a 17% drawdown — the reversal-heavy regime momentum hates. More tellingly, after adjusting for six trials the deflated Sharpe ratio is just 0.476, well short of significance, even though the probabilistic Sharpe reads a healthy 0.893. The most recent out-of-sample window held up (13.34% return, 2.15 Sharpe), but the headline numbers flatter a strategy whose edge is not yet statistically proven.
Verdict
Dual-momentum is doing exactly what it should: compounding in trending markets and standing aside when there is nothing to ride. The strengths — strong trend-following returns and honest risk discipline — are real. So are the risks: a punishing win rate, clear regime sensitivity, and a validation that fails the multiple-testing bar. Treat it as promising rather than proven, and watch whether the cash stance turns into conviction when the next trend arrives.