Thesis
momentum-code applies a systematic momentum overlay to a 24-stock universe of large-cap US equities spanning technology, financials, healthcare, consumer staples, energy, and industrials. At each scheduled run it identifies the top positive movers and initiates buys up to a per-position cap, aiming to ride near-term price strength while limiting single-stock concentration. The universe is intentionally liquid — household names such as NVDA, MSFT, JPM, and XOM — keeping execution friction low.
Backtest Performance
Over 451 days the strategy posted a 19.76% total return (10.6% annualised CAGR), growing a notional portfolio to $11,976 at a total fee cost of just $5. Those headline numbers are creditable for a large-cap momentum approach. Two caveats are worth noting, however.
First, the Sharpe ratio of 0.65 sits alongside a maximum drawdown of 20.48% — a combination that implies the strategy can endure meaningful peak-to-trough pain for its risk-adjusted reward. Investors with tighter drawdown tolerances should take note. Second, the backtest logged only 5 trades across the full period, making per-trade win-rate statistics statistically thin rather than informative.
Turnover came in at 92.74%, moderate for a momentum rotation strategy, and foreign-exchange costs were zero given the all-USD universe.
Cross-Validation: Two Stories
The walk-forward cross-validation is where the picture becomes genuinely interesting — and genuinely complicated.
On the encouraging side, all four folds produced positive returns:
| Fold | Period | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +15.38% | 2.47 | 6.12% |
| 2 | Jan 2025 – Jul 2025 | +3.27% | 0.46 | 16.55% |
| 3 | Jul 2025 – Dec 2025 | +12.18% | 2.31 | 5.21% |
| 4 | Dec 2025 – May 2026 | +13.71% | 1.93 | 6.32% |
Fold 4 — the most recent out-of-sample period — returned 13.71% with a Sharpe of 1.93, the strongest risk-adjusted result in the series. Consistency across different market regimes is a meaningful signal.
On the cautionary side, the validation gate returned passed: false. The likely driver is the Deflated Sharpe Ratio of 0.338. The DSR corrects for multiple testing: when six candidate parameter sets are trialled and the best-performing one is selected, the probability that the observed Sharpe reflects genuine edge rather than lucky sampling drops substantially. A DSR below 0.50 is a meaningful overfitting flag regardless of how clean the individual folds look. The PSR of 0.811 offers partial reassurance — there is an 81% probability the true Sharpe is positive — but it is not enough to clear the combined threshold.
Recent Live Activity
Since going live, momentum-code has entered a quiet holding phase. The last executed trades date to June 1 (XOM at $148.69, NVDA at $224.20) and May 31 (BAC at $51.60, HON at $237.86, MSFT at $450.24). Every scheduled run from June 23 through June 30 logged zero executions, with one to three signals rejected per session — most likely because existing positions already sit at their per-position cap.
Portfolio value has held in the $9,400–$9,500 range across those six sessions, with roughly $609 in idle cash. The strategy is positioned but not actively rotating.
Verdict
momentum-code shows genuine consistency where it counts: positive returns in every fold tested, a resilient OOS period, and a liquid universe that limits blowup risk. The 20.48% max drawdown and the DSR-triggered validation failure are the two threads worth pulling. Narrowing the number of parameter trials or extending the backtest window to generate a denser trade record are the most direct paths to a cleaner validation verdict. Until then, the live paper-trading phase continues to build the empirical record — and the June–July quiet period will be a useful data point for whether the strategy adapts when momentum signals dry up.