The thesis
Dual-momentum is a trend-following strategy with a simple mandate: hold the strongest trending names by 60-day return, and exit when the trend breaks. It operates over a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, UNH, XOM and the like. The logic is textbook momentum: concentrate in what's working, cut what isn't.
Recent activity
The more interesting story right now is what the strategy is not doing. Across six scheduled runs from 5 to 12 November, it executed zero trades. Cash and total equity both sit flat at $10,000. In plain terms: nothing in the universe currently clears the trend filter, so dual-momentum is parked entirely in cash. That is the strategy behaving as designed — no trend, no exposure — but it also means it is contributing no live signal at the moment, and we have no fresh live trades to judge.
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%. Those are respectable headline numbers.
Two details deserve attention. First, the win rate is only 28.79% across 136 trades — but that is characteristic of momentum, not a flaw. The strategy wins by letting a minority of trends run while cutting losers quickly; the shape of the equity curve matters more than the hit rate. Second, turnover is extreme at 2,638%, meaning the book churns many times over. Fees stayed modest here ($136, no FX cost), but in a higher-cost or higher-slippage environment that churn is a real drag worth watching.
Validation: it did not pass
This is the headline risk. Our walk-forward validation failed. The nuance:
- 3 of 4 folds were positive. Folds 1, 3, and 4 returned +5.85%, +25.59%, and +13.34% respectively, with strong Sharpes (fold 3 hit 3.32).
- Fold 2 was the weak link: −7.31% with a 17.15% drawdown — deeper than the full-sample drawdown — over a stretch that also saw the most trading (60 trades). Trend-following paid a real cost in that choppy window.
- The deflated Sharpe ratio (DSR) is 0.476, dragged down by testing across 6 trials. While the probabilistic Sharpe (PSR 0.893) looks strong in isolation, the DSR is what accounts for multiple-testing bias — and it is the honest number here. The out-of-sample return of 13.34% is meaningfully below the full-sample 23.5%, the classic signature of a strategy that flatters itself in-sample.
Verdict
Dual-momentum has a coherent thesis and a backtest that wins the way momentum should. But the failed validation and the deflated Sharpe tell us to treat the 23.5% as optimistic, not expected. Combined with a week fully in cash, the sensible read is: promising character, unproven edge — keep it live on a short leash and watch fold-2-style drawdowns closely.