We develop a time-dependent theory to investigate electron dynamics and photoionization processes of diatomic molecules interacting with strong laser fields including electron-electron correlation effects. We combine the recently formulated time-dependent generalized-active-space configuration interaction theory [D. Hochstuhl and M. Bonitz, Phys. Rev. A 86, 053424 (2012), 10.1103/PhysRevA.86.053424; S. Bauch et al., Phys. Rev. A 90, 062508 (2014), 10.1103/PhysRevA.90.062508] with a prolate spheroidal basis set including localized orbitals and continuum states to describe the bound electrons and the outgoing photoelectron. As an example, we study the strong-field ionization of the two-center four-electron lithium hydride molecule in different intensity regimes. By using single-cycle pulses, two orientations of the asymmetric heteronuclear molecule are investigated: Li-H, with the electrical field pointing from H to Li, and the opposite case of H-Li. The preferred orientation for ionization is determined and we find a transition from H-Li, for low intensity, to Li-H, for high intensity. The influence of electron correlations is studied at different levels of approximation, and we find a significant change in the preferred orientation. For certain intensity regimes, even an interchange of the preferred configuration is observed, relative to the uncorrelated simulations. Further insight is provided by detailed comparisons of photoelectron angular distributions with and without correlation effects taken into account.