The fur of Castorocauda has been described as consisting of two kinds of mammalian fur: guard hairs and underfur. These two kinds of fur seen in the fossil of Castorocauda provided some of the first very solid evidence of a furry mammal in the Jurassic; evidence of mammalian traits and some samples of fur and hair have been seen prior to this, but, as with feathers, this was one of the first truly wonderful collections of soft tissue that is generally lost to fossilization processes. It is also one of the earliest mammals recognized to have possessed the modern mammalian fur arrangement and follicle structure. The first kind of fur that was definitively recognize in the fossil is what is known as underfur or undercoat. This fur is short, flat, curly, and dense. It is this hair that keeps mammals dry in water and warm in winter. These rather different capabilities of this layer of fur are similarly achieved through the trapping of dry air against the skin which both repels water and maintains a buffer of warmth against the cold of the environment. Underfur serves as a thermoregulatory buffer for the skin and, overall, whole organisms like us and Castorocauda from the temperatures outside our bodies.
This is in contrast to the role of the second layer of fur recognized in Castorocauda: guard hairs. Also colloquially referred to as the coat, guard hairs are the main centers of pigmentation in fur. Display patterns, camouflage, and the shininess of a mammal's fur are reliant on the pigments collected in the guard hairs; these are of course regulated by other factors such as genetics and diet as well. Guard hairs are typically long straight hairs that come to a point and, in some mammals, can be fairly coarse. It is these hairs that we notice in threat displays, when frightened, and in other moments of agitation or excitement. Guard hairs also, as the name implies, guard the body. They do not trap warmth or repel water as well as underfur (though they are capable of doing so). However, guard hairs can significantly block harmful ultraviolet radiation from reaching the skin, something that the underfur does not do as much of (possibly because of the presence of guard hair of course).
What does all of this fur mean to Castorocauda? Thermoregulation, as a small mammal, and thermal insulation, as an aquatic mammal, created enormous metabolic requirements for Castorocauda. Out of the water, seasonal shifts in temperature would have caused the animal to need more or less of a coat of fur, but may not have been so demanding that Castorocauda possessed seasonally variable coats. We can remain open to this possibility as we do not know exactly how much of a temperature shift between seasons mammals were readily tolerant of during the Mesozoic, but it may be that the shifts did not cause radical changes in coat length or color (see #7 on this list specifically). In the water, coat length changes the dynamics of locomotion and, if we consider mammals that we know to be semiaquatic, we can make inferences on whether or not Castorocauda would have benefited from having a long coat; color changes based on season may not have affected the animal at all. Most semiaquatic mammals possess short, coarse guard hairs with a few exceptions, river otters and beaver, for example, possess long guard hairs. The unique mammalian hairs of Castorocauda, regardless of their seasonal changes, pigmentation, or general coarseness, were and remain an important feature of the mammalian body plan. The fur allowed Castorocauda to stay warm all year long and to dive into waters both warm and cold to chase fish and crustaceans (or other invertebrates). Weighing in at up to 800 g (about 2 lbs), Castorocauda would have gotten a great deal of help in maintaining its body temperature in colder waters from a thick coat of fur.