It's not a terrible matchup, unless Diddy has full banana+stage control. Diddy's easy to get in against, punish, ftilt, follow up on, edgeguard, and what have you, so long as you don't allow him to keep bananas around. Prevent that from happening in however fashion you feel most comfortable in.
If Diddy does have bananas around, do your best to work around them and not get hit by any, because you really can't afford to eat too much damage with your light weight, fast falling speed, and recovery. Catching bananas could help, but skilled Diddy mains would likely be familiar with playing a game of catch, so don't just assume you can safely toss them back.
If you do manage to claim a banana, Sheik has enough speed to actually combo on hit-confirm in a number of ways, or if you want to be fancy you can attempt her banana lock thing.