The thesis
Dual-momentum is a classic trend-follower: 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 (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), staples (PG, KO, WMT) and energy (XOM, CVX). The appeal is simple: let winners run, cut laggards, and avoid the sideways chop by only owning what is already moving.
Recent activity: fully in cash
The most striking thing about dual-momentum right now is what it isn't doing. Across its last six scheduled runs — from 30 October through 6 November — every single session executed zero trades and rejected zero candidates, leaving the book flat at $10,000 cash, $10,000 total. By design, that is the strategy telling us nothing in the universe currently clears its trend threshold. That discipline is a feature, not a bug, but it also means there is no live edge being captured this week.
Backtest performance
On paper the numbers look attractive: a 23.5% total return over 451 days, final equity of $12,349.63, and a 12.52% CAGR. The texture underneath is pure momentum, though. The win rate is just 28.79% across 136 trades — this is a strategy that loses small often and wins big occasionally. Turnover is an eye-watering 2,638%, so it churns the book many times over; fees came to only $136 and FX cost zero, but in a higher-friction venue that churn would bite. Max drawdown was a manageable 15.67% and the Sharpe a middling 0.95.
Validation: did not pass
This is where the story turns cautious. Our walk-forward validation failed. Three of four folds were positive, but the spread is wide: Fold 1 +5.85% (Sharpe 1.23), Fold 3 a standout +25.59% (Sharpe 3.32), and Fold 4 +13.34% (Sharpe 2.15) — yet Fold 2 lost 7.31% with a negative Sharpe of -1.05 and a 17.15% drawdown, deeper than the full-sample figure. Out-of-sample return held up at 13.34% with a 2.15 Sharpe, and the Probabilistic Sharpe Ratio is a healthy 0.893. But the Deflated Sharpe Ratio — which discounts for the six trials run — lands at just 0.476, below the confidence bar. In plain terms: the headline Sharpe doesn't survive once you account for how many variations were tested.
Verdict
Dual-momentum has a coherent thesis and a backtest that flatters it, but the validation gate is doing its job here. The low win rate and extreme turnover are inherent to trend-following and tolerable; the real caveat is the gap between an impressive full-sample Sharpe and a deflated one that signals possible overfitting. Combined with a week of sitting flat in cash, the honest read is: promising engine, unproven edge. Keep it live on paper, watch Fold 2-style regimes closely, and don't size it as if the 23.5% is repeatable yet.