Recently, during the webmaster hangout, a person asked about whether the search result is getting affected for the similar domain name. He asked if he owned a website name bluewidgets.com and his competitors start mybluewidgets.com or ibluwidgets.com, then the ranking of his original site will be hampered as Google may get confused in signals.
John Muller, the representative of Google said there will be no harm for the similar domain names as Google treats every domain name as a separate entity. He assured; “If they just look similar we still see them as separate URLs…So that there wouldn’t be any kind of algorithmic overlap that our algorithms would say well sounds similar maybe they mean the other one. Either it’s the correct domain name or it’s not the correct domain name.”
Though Google will never get confused the visitors of your site might be. No algorithm confuse between the domain names unless you use a redirect. But it is advisable to avoid the similar kind of names.