What does Paimon actually represent?
The brilliance of Hereditary lies in metaphor, like all truly great horror films ultimately do. It's clear from the beginning that Annie's family is cursed in some way, and obviously the name itself is a bit of an on-the-nose description of the evil we can inherit from our ancestors -- genetically or spiritually. The movie gets literal with the demon stuff, but it's all subtext for the real stigma plaguing them: mental illness.
In Annie's early grief counseling sessions, she recalls her family's troubled history. Her mother was diagnosed with D.I.D. (dissociative identity disorder) and her brother was a paranoid schizophrenic who eventually took his own life. These disorders manifest in the next generation, too; after Charlie's death, Annie dovetails into mania, having middle-of-the-night episodes that feel like early symptoms of bipolar disorder, but also might be her mother's D.I.D. passed along, too. She flips between moods the way a dissociative person might, laughing erratically, then smiling after her husband's death. In one scene, we catch a glimpse of an email her husband is drafting, which seems to indicate that Annie has had manic episodes in the past, and he's worried she might be having another one. Peter's own descent into apparent self-harm and unexplained visions might symbolize the schizophrenia also present in his uncle.
Paimon, then, serves as a catalyst for a deeper reading. He is what the coven seeks, but also what Annie and Peter seek: salvation from an unhealthy mind, and everlasting connection to the world around them. The brilliance of Hereditary is that, in the end, we the audience can have both.