Stream ciphers in general are more efficient but less secure than a block cipher, provided all else being equal in terms of each construction following both necessary and preferred principles (Katz & Lindell, 2009; Boneh, 2013).
Shannon's “confusion and diffusion” refers to good confusion and diffusion of message block bits and secrecy bits based upon linear and non-linear functions as you mostly point out.
There are different kinds of stream ciphers as there are different block ciphers. Some stream ciphers did not pass two or more critical statistical tests to show powerful diffusion.
In general you are correct: stream ciphers either have low or even slow diffusion rates. However, linear masking and improve initialization processes helps reduce vulnerability to linear and side attacks. Stream cipher Hc-256 is a good candidate to test further.
Stream ciphers are faster than block ciphers, but block ciphers with proper construction have higher diffusion – still, pseudo-randomness can be generated from a block cipher to stream ciphers to reduce attack vulnerabilities.
Same author as thesis but shorter and more straightforward: