The success of cloud computing technologies heavily depends on the underlying hardware as well as the system software support for virtualization. As hardware resources become more abundant with each technology generation, the complexity of managing the resources of computing systems has increased dramatically. Past research has demonstrated that contention for shared resources in modern multi-core multithreaded microprocessors (MMMP) can lead to poor and unpredictable performance. In this paper we conduct a performance degradation study targeting virtualized environment. Firstly, we present our findings of the possible impact on the performance of virtual machines (VMs) when managed by the default Linux scheduler as regular host processes. Secondly, we study how the performance of virtual machines can be affected by different ways of co-scheduling at the host level. Finally, we conduct a correlation study in which we strive to determine which hardware event(s) can be used to identify performance degradation of the VMs and the applications running within. Our experimental results show that if not managed carefully, the performance degradation of individual VMs can be as high as 135%. We believe that low-level hardware information collected at runtime can be used to assist the host scheduler in managing co-running virtual machines in order to alleviate contention for resources, therefore reducing performance degradation of individual VMs as well as improving the overall system throughput.