Pargo, 26, played in 44 games with Memphis last season, averaging 2.9 points and 1.3 assists in 9.7 minutes. In 2010-11, Pargo played in the Israel Premier League and averaged 10 points, 3.5 rebounds and 6.3 assists in 27.1 minutes.
"Our approach remains consistent as we try to bring in young talent, create future opportunity with draft picks as potential assets, and maintain flexibility," Cavaliers general manager Chris Grant said. "Jeremy adds depth to our backcourt. He is a young, aggressive, athletic guard who we feel fits well with our style of play, both defensively and offensively."
Kennedy appeared in two games for the Cavaliers last season and averaged six points, 3.5 rebounds and 1.5 assists.