Is there a way, using Sparkle Magic or other methods, to create a bobbing effect while suspended in the air? I want Dr. Killinger's umbrella to let him hover in air, as well as bob up and down while idle, slightly swaying.

Is this possible?

I'd think so, yes. Just use AddForce on the actor. With a bit of fiddling you should be able to make it work. Use this for reference. Or AddAbsForce if you can't get it to work. Or AddAbsImpulseForce if you can't get the forces to work.