You don't really need to understand the math behind diminishing returns, you just need to know how to apply it to your gear.
First off, if either your Dodge or Parry are under 20%, keep stacking that stat. Once your Dodge AND Parry are both over 20% then you can use this handy dandy little macro
So if the macro comes back at more than 1.88, get more parry, other wise more dodge.
/script DEFAULT_CHAT_FRAME:AddMessage("If ratio above 1.88 start getting Parry. Currently at: "..string.format("%.2f", (GetDodgeChance()-10)/(GetParryChance()-10)))
The only gem/enchant decision you've made that I question is the agi/stam gem in your gloves. You are sacrificing a stam socket bonus. I'd find a red gem slot to get your meta activated.