I was assuming that the related tags API call, returns all the tags that co-occur with the input tag. But a closer look at the API documentation indicate the following:
Returns the tags that are most related to those in {tags}.
What is meant by most related? From the requests that I have tried for a few tags, it seems to return at most top 60 co-occurrence tags with decreasing count of questions in which the tags co-occur. Is this correct? May be the documentation could be improved to make this clear.