The thesis
Dual-momentum is a classic trend-follower: hold the strongest-trending names by 60-day return from a 24-stock large-cap universe (AAPL, MSFT, NVDA, JPM, V, JNJ, XOM and the like), and exit when the trend breaks. It is a simple, well-understood idea — ride what is working, cut what isn't — applied to a liquid, familiar basket.
The backtest looks good
Over 451 days the strategy returned 23.5%, compounding a $10k book to roughly $12,350 (12.52% CAGR). Sharpe came in at 0.95 with a 15.67% max drawdown — a respectable risk-adjusted profile for a long-only equity strategy.
Two caveats sit underneath that headline. First, the win rate is just 28.79% across 136 trades. That is normal for momentum — a few large winners carry many small losers — but it means the equity curve depends on letting winners run, and it is psychologically and operationally unforgiving. Second, turnover is 2,638%: the book churns heavily, so slippage and fees matter more than the modest $136 of modelled costs suggest here.
Validation says: not yet
This is where the picture gets honest. Our walk-forward validation gate did not pass. Across four folds the strategy was positive in three, but the spread is wide:
- 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
Fold 2 is the warning: in a choppy, trendless regime the strategy bled money and drew down harder than the full-period figure implies. The deflated Sharpe ratio (DSR 0.476) — which penalises for the six trials run during development — lands below the 0.5 threshold, even though the probabilistic Sharpe (PSR 0.893) is encouraging. In plain terms: the result is probably not pure noise, but once you account for how many variants were tried, it isn't robust enough to green-light automatically.
Right now: fully in cash
Recent activity is itself a data point. The last six scheduled runs (29 Oct through 5 Nov) all report 0 executed, 0 rejected, with the book flat at $10,000 in cash. No name is clearing the momentum filter, so the strategy is doing exactly what it should in the absence of a trend — nothing. That is a feature, not a failure, but it also means there is no live track record to judge yet; the strategy is waiting, not working.
Verdict
Dual-momentum has a coherent thesis and a backtest that flatters it, but the validation layer is doing its job by flagging regime sensitivity and multiple-testing risk. The low win rate and fold-2 drawdown are the real exposures. For now it earns a watch rather than trust: let it demonstrate — on live, qualifying trades — that fold 3 was the rule and fold 2 the exception, before sizing it up.