grep - how to compare strings in 2 files ?

I am trying to use grep to compare 2 files to generate the "difference" file. Following is the example and expectation.
example:
file1
A
B
C
file2
AA
D
E
BB

Expectation: I am using following grep command;
grep -v -f file1 file2 > file3.

Here is the output from previous command:
D
E

Instead I am also expecting AA and BB in the output. The above command is treating "AA" and "BB" same as "A" and "B"
Any inputs will be appreciated.

man comm diff

thanks for your inputs