I’m a huge fan of horror and while this question is interesting to think about it kind of misses the point. Both are ultimately a tool to tell a story. When physical horror is put in the foreground and expected to carry the story most people will agree it’s not satisfying because you are just seeing gore for the sake of it. Essentially exploitation movies made for the sake of getting the audience to think “It was so gross when...”

Physical horror is at its best when it’s purpose is to further the psychological aspects of the story. Take the original Texas Chainsaw Massacre for example. While it is certainly has grotesque scenes those shots are used to further the feeling of discomfort and psychological horror the characters are feeling without ever using blood. They are typically shot very quick and dry which makes it more real and shocking.

Probably a cop out answer but my favorites are the stories that use both.