The color of your contact has no assigned meaning in Signal. It is there for your customization.
To change the color for your contact
- Open the chat with this contact.
- Tap on your contact name or number.
- Tap on Color and choose a color.
To change the avatar for your contact
- Open your Android phone's contact list.
- Locate this specific contact.
- Edit this contact's entry in your phone to include an image.