The red bit is probably to scare off predators and gets bigger as the caterpillar grows. They also get more of the white back tufts as they grow larger.
The wierd bit with this species is the female. When she emerges from her cocoon, she hasn't got any wings. She looks a bit like a spider and either sits at the end of a branch or stays on her cocoon releasing a vapour that attracts the winged males.
I used to keep them when I was a kid. I let the males go to find females and left the females near an open window to attract new males.
Natrix
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