What is the right course of action here?

You answered correctly. In this situation, the sign on the right side of the street (a yellow diamond) indicates you are on a priority road. This means you and the yellow car both have the right of way over the red car, which is coming from a minor road. The yellow car is going straight, so it passes before the red car as well. You are turning left and have the same priority as the yellow car, but since neither of you interfere with each other's path, you both go before the red car. Remember: vehicles on the priority road always go first, and vehicles on the secondary road (like the red car) must wait.