Shares of Petrobras have surged almost 25% since Oct. 3.

Even with the current ebullience surrounding the idea of a Neves win, EWZ remains a volatile trade as the ETF has displayed an intimate correlation to polling data. McDonald acknowledges the CBOE Brazil ETF Volatility Index’s (VXEWZ) current volatility of 65 is one of the highest on an index-related product he has seen and that volatility implies a move of 12% to 16% in either direction for EWZ.

Brazilian stocks tussle with their Indian counterparts for the dubious honor of being the most volatile among BRIC equities. EWZ’s three-year standard deviation of 28.3% is more than 1,100 basis points higher than the comparable metric on the iShares MSCI Emerging Markets ETF (NYSEArca: EEM).

McDonald said EWZ could face downside of up to 25% if Rousseff wins.

CBOE Brazil ETF Volatility Index

Chart Courtesy: Bloomberg

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