A Halal pool
Eight marks, standing in for the screened list. Same length, no scores yet. The real book holds about 47 names.
Paper 04 · v1.0 · September 2026
After Halal screens, does standing aside protect the book?
After banned businesses and AAOIFI screens, keep the top fifth of Halal names by 12–1 relative strength, cap-weight them, and hold cash whenever SPY closes under its 200-day average. This page is a reading of that backtest. It is an exploratory note, with no probability attached and no live-return target.
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Dual momentum asks two questions in order. Which Halal names have been stronger than the market, and is the market itself in an uptrend worth owning. The first question is a ranking. The second is a switch.
Relative strength here is the classic 12–1 return: about a year of price change, skipping the most recent month, minus the same window for SPY. The switch is daily. If SPY’s adjusted close is under its 200-day simple moving average, the book holds cash at a 0% return until the average is reclaimed.
The screens come first. A one-time activity screen removes 64 names from the current S&P 500 list, leaving 439. AAOIFI debt, cash, and receivables tests then re-run every month-end on filings known that day. The hope is that highly leveraged turnarounds are gone before the ranking starts. The screens also tilt the pool toward technology, so a strong result can still be a Halal winners list plus one well-timed stretch in cash.
Then the book stands aside
Relative strength, then the regime
Selecting
Names are ranked by relative strength versus SPY.
31 Dec 2024
META20.8% of the book
Largest weight at the 31 December 2024 rebalance. A top-quintile winner. The daily rule can still park the whole book in cash.
31 Dec 2024
AVGO14.7% of the book
Second weight that day. Cap-weight, with no name cap, is why a few winners can be a third of the book.
31 Dec 2024
WMT9.9% of the book
Held. The year-end list is not only technology. Walmart, Costco, and Oracle sat behind the two largest names.
31 Dec 2024
ORCL6.2% of the book
Held. The last funnel was about 429 names with fundamentals, 268 Halal, and 54 momentum picks.
31 Dec 2024
COST5.5% of the book
Fifth weight. Median book size across the live window is 47 names, ranging from 43 to 55.
Each month-end the book starts from those 439 sector-eligible names, drops anyone failing AAOIFI on filings known that day, scores 12–1 relative to SPY, keeps the top fifth, and cap-weights. There is no equal-weight book, no volatility target, and no single-name cap. If fewer than 15 names survive, that month is skipped.
Between rebalances the average is checked every day. There is no intra-month stop-loss. A name can still be in the top fifth and the book can still be in cash, because the switch looks at SPY, not at that name’s rank.
A monthly list, a daily switch
One illustrative month
The list is chosen at month-end
Sharia status and the 12–1 rank are checked then. A name that fails is sold at that rebalance, not in the middle of the month.
The live window starts on 19 December 2019, the first day the strategy and both benchmarks overlap with SPUS, and runs through 30 December 2024. That is 1,265 trading days. Days before SPUS inception are left out of the headline tables.
The book was invested on 80.8% of those days. The rest were cash under the moving-average rule. Median book size is 47 names. At the last rebalance the funnel was about 429 names with fundamentals, 268 Halal, and 54 momentum picks.
Five years, one shallow step
Growth of $1, from calendar-year returns
- Dual momentum
- SPUS
- SPY
| Book | Ending value | CAGR |
|---|---|---|
| Dual momentum | $2.38 | 18.81% |
| SPUS | $2.27 | 17.78% |
| SPY | $2.00 | 14.75% |
Year-end points
Growth of $1 from the published calendar-year returns, 19 December 2019 through 2024. The line joins year-ends. It is not the daily curve. 2019’s 12-day stub sits inside the first step.
Try the twin
Turn the 200-day rule off
Same Halal pool, same 12–1 ranking, same cap weights. The only change is whether the book holds cash when SPY is under its 200-day average. These are the two published results, not a slider across any cash share.
A sketch of the trough. The endpoints are the measured maximum drawdowns. The bend is the rule, not the daily path.
CAGR
18.8%
Max drawdown
−15.4%
Volatility
17.7%
Sharpe
0.95
Invested on 80.8% of live days. The other days are recorded as a 0% return.
What the window shows
Finding 1: The switch
The 200-day rule is what cut the trough in half and still led on growth.
Dual momentum
−15.4%
No SMA
−30.2%
SPY
−33.7%
SPUS
−30.8%
Maximum drawdown, peak to trough. Longer bars fell further.
| Book | CAGR | Vol. | Sharpe | Max DD | Calmar |
|---|---|---|---|---|---|
| Dual momentum | 18.81% | 17.72% | 0.95 | −15.39% | 1.22 |
| No SMA | 13.38% | 24.70% | 0.55 | −30.15% | 0.44 |
| SPY | 14.75% | 20.94% | 0.67 | −33.72% | 0.44 |
| SPUS | 17.78% | 21.58% | 0.77 | −30.80% | 0.58 |
From 19 December 2019 through 30 December 2024 the dual-momentum book returned 18.8% a year, against 14.8% for SPY and 17.8% for SPUS. Maximum drawdown was −15.4%, against −33.7% and −30.8%. The same Halal momentum screen, kept invested, returned 13.4% with a −30.2% drawdown. Sharpe was 0.95 with the switch and 0.55 without it.
These are annualized figures from a window with one deep risk-off year and several bull years. They are not a forecast of 19% a year.
Finding 2: The shape of the years
The book led in 2020, lost much less in 2022, and trailed in the strong bull years.
2020
2021
2022
2023
2024
- Dual momentum
- SPUS
- SPY
- Shaded year: 2022, about one-fifth of days invested.
| Year | Dual momentum | SPY | SPUS |
|---|---|---|---|
| 2020 | 34.44% | 18.33% | 25.68% |
| 2021 | 22.23% | 28.73% | 35.62% |
| 2022 | −5.48% | −18.18% | −22.76% |
| 2023 | 25.52% | 26.18% | 34.20% |
| 2024 | 20.36% | 25.34% | 27.67% |
| Year | Dual momentum | S&P 500 | SPUS |
|---|---|---|---|
| 2019from 19 Dec | 1.25% | 1.21% | 0.81% |
| 2020full year | 34.44% | 18.33% | 25.68% |
| 2021full year | 22.23% | 28.73% | 35.62% |
| 2022risk-off | −5.48% | −18.18% | −22.76% |
| 2023full year | 25.52% | 26.18% | 34.20% |
| 2024full year | 20.36% | 25.34% | 27.67% |
2020 was +34.4% against +25.7% for SPUS. 2022 was −5.5% against −22.8% for SPUS and −18.2% for SPY, in a year when the book was invested on about one-fifth of trading days. In 2021, 2023, and 2024 it trailed both benchmarks. That is the shape of a rule that spends real time in cash. The book was invested on 80.8% of the 1,265 live days.
2019 is a stub after SPUS inception. The paper does not publish an invested-share for every year, only the full-sample share and the 2022 description.
Relative-momentum quintiles, CAGR
15.9%
Q1
19.6%
Q2
18.7%
Q3
14.3%
Q4
14.9%
Q5
Always invested. No 200-day overlay. Ink marks the bucket that led.
| Bucket | CAGR | Max drawdown |
|---|---|---|
| Q1 highest | 15.9% | −36.8% |
| Q2 | 19.6% | −30.3% |
| Q3 | 18.7% | −35.6% |
| Q4 | 14.3% | −29.4% |
| Q5 lowest | 14.9% | −30.2% |
Five buckets, always invested
Cap-weight the Halal universe by 12–1 relative momentum. Q1 is the highest. These books do not use the 200-day cash rule.
Finding 3: The ranking
Inside the Halal pool, higher relative momentum did not line up as a staircase.
Five cap-weighted quintiles, always invested, with no SMA overlay. Q2 returned 19.6% a year and Q1, the highest momentum, returned 15.9%. Q3 was 18.7%. Q4 and Q5 were 14.3% and 14.9%. The cumulative Q1 minus Q5 spread finishes near flat. The live book still buys the top quintile. The cleaner comparison is the no-SMA twin in finding 1.
Quintile books stay invested through 2022. They are a test of the sort, and they are a different object from the switched book.
Finding 4: What the path is
Low beta is the cash. When the book is invested, it is still a technology overweight.
Versus SPY
10.9% alpha
β 0.42 · R² 0.25 · tracking error 19.5%
Versus SPUS
8.9% alpha
β 0.48 · R² 0.34 · tracking error 18.3%
Average weight while invested
Olive is the momentum book. Gray is an equal-weight Halal universe. On cash days this mix is zero.
- Technology+17.9%
- Healthcare+5.2%
- Communication+7.2%
- Cyclical−1.0%
- Staples+3.3%
- Industrials−7.9%
- Energy+0.7%
- Real estate−3.4%
- Materials−1.8%
- Financials−3.6%
- Utilities−6.3%
Versus SPY, annualized alpha is 10.9% with a beta of 0.42 and an R² of 0.25. Versus SPUS, alpha is 8.9%, beta 0.48, R² 0.34. Information ratios are near zero because tracking error is about 19%. Technology plus communication services average about half of weight on invested month-ends. Industrials and utilities are underweights.
Without a sector-neutral twin, the leftover cannot be split into winner selection versus extra technology on the days the book is actually invested.
Friction
Monthly top-quintile momentum rotates hard, and cap-weights amplify names that enter or leave the list. A 10 bp cost on one-way turnover is about 0.4% a year. That leaves an 18.2% net compound growth in this sample. Real slippage on full cash exits could be wider.
Turnover, annualized
401.7%
One-way. Half the weight change between month-end books.
Cost drag at 10 bp
0.4%
Net CAGR 18.2%
Purification drag
0.02%
311 dividends while held. Interest-income tags can be missing.
Rebalances with holdings
72
Average names 48.7
Robustness
The no-SMA twin holds the Halal pool, the 12–1 ranking, and the cap weights fixed, and drops only the cash rule. It loses to SPY on every risk-adjusted line and draws down −30.2%. The live book beats SPY and SPUS, and its maximum drawdown is −15.4%. In this sample the overlay is what produces the result.
The quintile sort does not. Q2 and Q3 beat Q1. A sector-neutral twin was not run, so the technology overweight on invested days stays mixed in with the selection. The 200-day length was not re-tested at other windows. One risk-off year is not every bear market.
SPUS is a cap-weighted industry-exclusion ETF. It is not an AAOIFI financial-ratio index, so a gap versus SPUS is a gap versus that ETF.
Levers
The rule runs on a handful of named choices. Each row is marked data or assumption.
| Lever | Value | Kind | Basis |
|---|---|---|---|
| Relative momentum | 12–1 return minus SPY | data | About 252 trading days, skipping the latest 21 |
| Keep quantile | Top 20% | assumption | Fixed before the run. Not fit on a hold-out |
| Absolute trend | SPY above its 200-day SMA | data | Checked every day on adjusted close |
| Cash yield | 0% a day | assumption | Held until the average is reclaimed |
| Debt cap | < 30% of 24-month market cap | data | AAOIFI, plus cash and receivables screens |
| Weighting | Market cap | assumption | No name cap, no optimizer |
| Clocks | Month-end list, daily switch | assumption | Skip the month if fewer than 15 names survive |
What this does not capture
- No 2008, no second rising-rate recession beyond 2022, and no hold-out after the rule was frozen.
- Relative-momentum quintiles are not monotonic. The live edge in this window reads as regime timing.
- Sector exclusions use the current S&P list and current activity labels, not the 2019 membership file.
- There is no name cap. At the last rebalance Meta was 20.8% and Broadcom 14.7%.
- Cash earns 0% a day in this test. Regime exits are not charged beyond the month-end turnover series.
- The 200-day length and the top-quintile cut were fixed before the run. A five-year window is still partly in-sample.
- No intra-month AAOIFI monitor. A name that fails mid-month stays until the next rebalance. The SMA is the only daily check.
A cap-weighted book of AAOIFI-screened S&P 500 names in the top fifth by 12–1 relative strength, held only when SPY is above its 200-day average, beat SPY and SPUS from late 2019 through 2024 on compound growth and on drawdown. The twin without that average falls back with the market. The shape is worth another paper: a frozen rule, point-in-time index membership, a name cap, and at least one more independent down year. It is not ready to promote to a live mandate.