Which real estate portfolio is better diversified: one with properties in the San Francisco Bay Area and Greater Los Angeles, or one with properties in Tokyo and Honolulu? In other words, is geographical distance the crucial element that determines the level of systematic risk shared between two real estate markets? Not necessarily. Consider that the Japanese economy of the late 1980s produced a surge of tourism to and investment in Hawaii, so much so that the impact of Japan’s subsequent recession is still being felt there. This economic link allowed movements in Tokyo’s real estate markets to echo in Hawaii’s, despite the ocean, languages, currencies, and national borders that separate them.