Using 'diff' (or anything else) to get character-level diff between text files

Question

I\'d like to use \'diff\' to get a both line difference between and character difference. For example, consider:

File 1

abcde
ab         


        

Answer 1

Coloured, character-level diff ouput

Here's what you can do with the the below script and diff-highlight (which is part of git):

#!/bin/sh -eu

# Use diff-highlight to show word-level differences

diff -U3 --minimal "$@" |
  sed 's/^-/\x1b[1;31m-/;s/^+/\x1b[1;32m+/;s/^@/\x1b[1;34m@/;s/$/\x1b[0m/' |
  diff-highlight

_{(Credit to @retracile's answer for the sed highlighting)}