Keep in mind that it is your unconscious that chooses the symbols in the dream. So your conscious relationship with your grandmother is one thing, but your unconscious may sense something about her that resonates with something in you. This could be her wisdom from living through many experiences.

Your demon self is unconscious as well, most likely. It's a symbol for times of the day that you act a certain way or say certain things that your unconscious notices but your conscious ego does not. Your unconscious chooses the symbol to represent the part of you from which these things come.