Diminishing returns don't exist on resistances, or even % damage reduction stacking.
Each % damage reduction that you stack has increased value on the 0-100% scale, same as CDR.
If you have 0% damage reduction, and gain 20%, you're taking 4/5 of the damage you would before you get it.
If you have 90% damage reduction and gain 2% more (effectively 20%), you're still taking 4/5 of the damage you would before you get it.
Yes, 2 is less than 20, but on a 0-100% scale, the value of each % increases exponentially.
And even so, the % damage reduction is effectively a coefficient. It doesn't actually mean anything...its just a representative value.
If you have 100 armor, you actually have 200% EHP vs physical damage, though it can effectively be considered 50% damage reduction.