During a three-year stay at Wolves, Jota made 131 appearances for the club, scoring 44 goals, including consecutive hat-tricks in the 2019-20 Europa League victories over Besiktas and Espanyol.
In September 2020, he joined Premier League champions Liverpool in a £41m deal, with Wolves boss Nuno saying Jota is leaving "knowing that it will never be forgotten, especially by our fans, all the memorable moments that Diogo provided".
"We were gutted we were losing him because he was that good," said Coady.
"But at the same time, you gave him a big hug and you went, you know what mate, you deserve it more than anyone. Go and enjoy yourself. Go and make a name for yourself at one of the biggest clubs because you can certainly do that. And he has done for that a number of years."
Coady posted a moving tribute to his former team-mate on his social media account after hearing the news, which he said he did while he "cried my eyes out".
In the post, he describes how he felt grateful hearing his kids say "dad, you played with Jota" when the Liverpool player came up on the television screens - a feeling he reiterated again.
"People look at football and think it's all about rivalry. But watching him win the Premier League with Liverpool, it filled me with immense pride - to say I played with him and he has gone on to do incredible things," said Coady.
"He took it by storm, like he took us by storm. Like he then took the Premier league by storm. Like he then took Europa League by storm with Wolves.
"He's then gone and done it with one of the biggest clubs in the land. A remarkable footballer, but an even better team-mate, which is 10 times more important than being a remarkable footballer for me."