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José Bordalas' side have been linked with a move for the former Manchester City player since the start of the season, with Getafe club president Angel Torres Sànchez confirming he had previously approached Florentino Perez about a potential move.
However, despite their determination to secure a loan move for the 20-year old, he now looks set to remain at the Santiago Bernabeu, and battle for a place in Zinedine Zidane's first team.
Diaz is yet to start a La Liga game for Zidane's side so far this season, however according to reports in Marca, he is confident that he can break into the Frenchman's plans before the end of the campaign.
Real Madrid are open to Diaz leaving the club before the transfer window closes on Janaury 31, but they now look set to explore other options to move him out of the club.
