Color Me Emotional
Because Navi and Tatl appear as glowing orbs instead of humanoid forms, they don't have the luxury of showing their emotions through facial expressions or body language. So they use the next best thing: colors! Like traffic lights and national security risk meters, Navi and Tatl show what they are thinking and the amount of danger Link is in through different colors.
Red can represent anger, passion, rage, danger, and courage. Now while Navi and Tatl are rarely seen in this color, they do appear like this when Link is in extreme trouble. An ambush for example, or when Link first meets Sakon the thief in Ikana Canyon. Most fairies have a keen sense of judgment for characters, so it's no wonder why Tatl sounded the alarms when Sakon became verrrrrry interested in Link's sword... One of the most often colors that Navi and Tatl sport. Yellow can be related to caution, yield, warning, and some nice things too. But in the game a yellow fairy means there is an enemy nearby, so we'll stick to those meanings. Since Link's guardian fairies are quick to tell who is friend or foe, you the player can easily figure out whether you should talk to the strange creature or just slice it in half. Like the information signs on the highway or the infamous bookworm, fairies will turn green when there is something useful nearby. Hidden healing fairies, signposts, and key points to solve in order to enter or move through dungeons are just a few examples. On the color scale green is one of the cooler colors, and since knowledge doesn't pose a threat to Link, there's no need for warm colors. Also, green is easily noticeable. Blue is the most peaceful, pacifying, and relaxing color on the scale. It also represents sadness, but overall, non-threatening. So it's no wonder why the fairies turn this shade when Link comes across a new friend. Even if that "friend" is rude to Link, as long as he or she is not a minion of evil or a signpost, Navi and Tatl will turn blue upon meeting them.