That's essentially correct. The compression ratio is the ratio of the volume of air in the cylinder from bottom dead center to top dead center in the cylinder. You say you have an 8.5:1 cylinder but what's really changed is the stroke of the piston, not the volume in the cylinder.
With a longer stroke on the piston, you have the same volume of space at bottom dead center, but at top dead center you have reduced volume, giving a higher compression ratio.