How can we diagnose this virus of automatic shortcut creation and files are hidden and folder option disappears and system speed became very slow?

Use a live CD e.g Linux, kaspersky rescue disk, or norton live disk to diagnose the infected files and folders

If you are a good antivirus like Kaspersky or Eset smart security they clear the virus automatically, personally i have faced this problem before,   there's this amazing tool (Usbshow) download and run on your machine it recovers back the file from shortcut 

the problem comes if you not using geniue anti virus or else you using pen drives effected trojen or malicious virus effected pen drive or files avialable in you system and that never remover unless you delete and the you scan the system .

even that problem never went then you must format the system . and beware such virus and also pendrive security software use  to avoid the partition software