Does this mean I should swap pets?

See attachment.

I really wanted to have a Perro in memory of my own in real life. I never understood what the arrows meant until now, I think. 2 major disadvantages- no magic auto with no miss chance for proration and AMPR, and apparently this blue arrow signifies a huge loss in damage?

Can attack skills have red arrows? Is there a pet with a red arrow for the skill Magic Lance?

 

no, but there are pets that have high damage % in their atk patterns
red arrows only show in support skills. if you really want to keep that kind of pet, I suggest have a gentle or a melee weapon timid, these pets cannot attack but can leech exp and skill exp (and may spam unli supp skills at the right conditions)

 

Physical pets is a great disadvantage and afaik perro is no combat doggo. It is a sub-par tank and best used as a gentle support(kinda forgot if it got boost support skills tho). You got good set-up except for the pet app tho. Best check the latest magic pet on the list and hope it be cute as fluff like perro.

 

blue arrows are shown when you use a physical skill on a magic pattern and vice versa.

the power will be less than the displayed default value, but you'll benefit from the physical/magic attack attributes in addition to the attacks innate attributes.
increased stability and hit rate for magic, chance of critical hits for physical.

although for Magic Lance it might not be suitable. with a cost of 800mp the skill won't be used often, and without additional effects the attack power matters a lot.