Dodge and Parry are independent events. Each one's chance is completely unaffected by the other under normal circumstances. Your total avoidance is the sum of your miss + dodge + parry chance. Increasing one of them does not reduce the others unless some how you are already unhittable in which case youd stay unhittable with any more gains.
Because each stat increases slower (due to diminishing returns) its better to split between the two.
If your wanting pure avoidance you'll be better off with gemming dodge rating rather then parry, unless you reach very very high levels of dodge where parry might start to become better.
Galushi - 85 Dwarf Warrior - Shadowsong US Alliance.
Branigan - 85 Goblin Warrior - Kilrogg US Horde.