That is correct in the vast majority of cases. Effectively the 3rd party antivirus indicates to Windows Defender that it will take over the active role of protecting the system.
Generally anti-virus should not run simultaneously, due to the way they work, they can easily end up conflicting an causing damage or corruption. You also don't need more than 1 anti-virus. Thus why 1 will disable for the other.
The exception to this for example can be Malwarebytes, Adware software etc. As these are made to effectively approach some or specific malware in a different way, and are usually made not to conflict with those antivirus, doesn't mean they don't, but they shouldn't.