Thesis
momentum-code pursues one of the most time-tested ideas in systematic equity investing: buy the top positive movers in a defined universe and cap exposure per position. The strategy's universe spans 24 large-cap U.S. names across tech (AAPL, MSFT, NVDA, GOOGL), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH, PFE, ABBV), consumer staples and discretionary (PG, KO, WMT, COST, MCD, NKE, HD), energy (XOM, CVX), and industrials (CAT, HON, DIS). The diversification is deliberate — momentum rotates, and a sector-agnostic universe gives the signal room to express itself.
Backtest Performance
Over 451 days, the strategy returned 19.76% on a simulated $10,000 book, ending at $11,976.21 with a CAGR of 10.6%. Total fees came to just $5, reflecting the low-turnover nature of a position-capped momentum approach — though the reported turnover of 92.74% suggests meaningful rotation beneath the surface.
The headline risk number is the maximum drawdown of 20.48%, which is meaningful for a strategy running in a conservative large-cap universe. A Sharpe of 0.65 is uninspiring on a standalone basis, and the win rate of 0% in the backtest aggregates warrants scrutiny — this likely reflects how the metric is computed (round-trip closed trades only, with most positions still open) rather than genuine profitless trading.
Cross-Validation: The Story Gets Interesting
The four-fold walk-forward validation paints a more nuanced picture:
| 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% |
All four folds are positive — a meaningful sign of robustness. The out-of-sample return of 13.71% (Fold 4, the true holdout) with a Sharpe of 1.93 is genuinely impressive. Folds 1, 3, and 4 show strong risk-adjusted performance; Fold 2 is the weak link, likely capturing the turbulent first half of 2025.
Despite this, the strategy failed validation. The culprit is the Deflated Sharpe Ratio (DSR) of 0.338, which adjusts for the number of trials tested (6). With a PSR of 0.811, there is an 81% probability the true Sharpe is positive — but the DSR penalizes the strategy for the multiple-testing problem. In short: the backtest Sharpe of 0.65 does not clear the hurdle once trial inflation is accounted for.
Recent Live Activity
The strategy's last executed trades were on 2026-05-31 and 2026-06-01, entering XOM (13 shares @ $148.69), NVDA (8 @ $224.20), BAC (38 @ $51.60), HON (8 @ $237.86), and MSFT (4 @ $450.24). Since then, every daily scheduled run from July 1–8 has resulted in zero executions, with 1–2 signals rejected per session and cash stable at $608.79. The portfolio value has ranged from $9,507 to $9,663 across that window, consistent with passive mark-to-market drift on existing positions.
Strengths and Risks
Strengths: Consistent cross-fold positivity is rare and meaningful. The OOS Sharpe of 1.93 suggests the momentum signal has real predictive content in calm regimes. Low fees and a well-diversified universe reduce implementation drag.
Risks: The 20.48% maximum drawdown is the most important number here — it exceeds the portfolio's current paper value relative to the Jun entry prices. The Fold 2 episode (16.55% drawdown, Sharpe 0.46) shows the strategy can suffer badly in choppy, mean-reverting markets. The failed DSR gate is not cosmetic; until more independent trials confirm the edge, the strategy remains in a watched state rather than a trusted one.