There are four colored capes that can be crafted out of various colors of wool. They were added in the v1.02 update, are classified as Accessories and are, at the moment, purely for aesthetic purposes. As with all capes, colored capes do not have any durability.
Colored capes will be removed since Summer Hotfix Update due to EULA changes. They have been replaced by the two cosmetic companions, the Fangrin and the Kraisith.
White Cape
Red Cape
Yellow Cape
Blue Cape