Option 1: This option states that both statements are individually true, and statement II is the correct explanation of statement I. However, this is not the correct option. While statement I is true, statement II is false.

Option 2: This option states that both statements are individually true, but statement II is not the correct explanation of statement I. This is the correct option. Statement I is true because the conversion of coal to diamond is indeed a physical change. However, statement II is false because physical changes can alter the composition of a material.

Option 3: This option states that statement I is true, but statement II is false. This is a correct analysis.

Option 4: This option states that statement I is false, but statement II is true. This is incorrect. Statement I is actually true, but statement II is false.

In conclusion, the correct answer is option 2, where both statements are individually true, but statement II is not the correct explanation of statement I.