This paper studies the time variation of the correlation between real estate stocks and the stock market and the implications for portfolio management. Monthly correlation series are estimated from daily returns for 14 American, Asian, and European countries/areas over 1990 to 2005 and strong evidence is found that the correlations vary across time. We also find that the correlation significantly relates to financial market conditionsñreturns and volatility in real estate, stock and bond marketsñand that the correlation is predictable. Based on analysis in the mean-variance framework, we show that the economic well-being of investors from taking into account the time varying correlation is affected significantly.